What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-18 compared with 2024-02-21 · 111 added, 151 removed, 235 unchanged (53% of the section changed)

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(together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells.

As of February 14, 2024, we owned or had partial ownership interests in and operated 37 mobile offshore drilling units, consisting of 28 ultra-deepwater floaters and nine harsh environment floaters.

Additionally, as of February 14, 2024, we were constructing one ultra-deepwater drillship.

As of February 11, 2025, we owned or had partial ownership interests in and operated 34 mobile offshore drilling units, consisting of 26 ultra-deepwater floaters and eight harsh environment floaters.

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.

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Significant Events

Fleet expansion —In May 2023, we completed the construction of and placed into service the ultra-deepwater floater Deepwater Titan , the first drillship equipped with two 20,000 psi blowout preventers.

Additionally, in September 2023, we issued 11.9 million Transocean Ltd.

shares with an aggregate value of $99 million to acquire the outstanding ownership interests of Liquila Ventures Ltd.

(together with its subsidiaries, “Liquila”), a previously unconsolidated variable interest entity that is constructing the ultra-deepwater drillship Deepwater Aquila , and as a result, Liquila became our wholly owned subsidiary.

Acquisition —In June 2024, we transferred noncash consideration with an aggregate fair value of $431 million, including 55.5 million Transocean Ltd.

shares and $130 million aggregate principal amount of 8.00% senior notes due February 2027 (the “8.00% Senior Notes”), to acquire the outstanding 67.0 percent ownership interest in Orion Holdings (Cayman) Limited (together with its subsidiary, “Orion”), the Cayman Islands company that owned the harsh environment floater Transocean Norge , and as a result, Orion became our wholly owned subsidiary.

See “— Operating Results” and “ —Liquidity and Capital Resources—Sources and uses of liquidity .

Disposal of assets —In February 2024, we completed the sale of the harsh environment floaters Paul B.

and Transocean Leader , together with related assets, for aggregate net cash proceeds of $49 million, including $6 million received as a deposit in the year ended December 31, 2023.

See “— Operating Results” and “ —Liquidity and Capital Resources—Sources and uses of liquidity .

In July 2024, we completed the sale of the ultra-deepwater floater Deepwater Nautilus and related assets for aggregate net cash proceeds of $53 million.

In the year ended December 31, 2024, we recognized a loss of $143 million ($138 million or $0.15 per diluted share, net of tax) associated with the impairment of the rig and related assets, which we determined were impaired at the time that we classified the assets as held for sale.

See “— Operating Results, ” “ —Liquidity and Capital Resources—Sources and uses of liquidity.

In September 2024, we executed purchase and sale agreements for the sale of the ultra-deepwater floaters Development Driller III and Discoverer Inspiration, together with related assets, for aggregate expected net cash proceeds of $343 million, and we recognized a loss of $629 million ($617 million or $0.67 per diluted share, net of tax), associated with the impairment of such assets, which we determined were impaired at the time that we classified the assets as held for sale.

The transactions contemplated by the binding purchase and sale agreements, executed in September 2024, for these rigs and related assets were subject to customary closing conditions, including the buyers’ ability to secure financing for the purchases.

In January 2025, after extending the originally agreed closing dates, we canceled the purchase and sale agreements as a result of the buyers’ failure to deliver the proceeds.

See “— Operating Results, ” “ —Liquidity and Capital Resources—Sources and uses of liquidity.

Secured credit facility —In April 2024, we amended the credit agreement that established our secured credit facility (as amended from time to time, the “Secured Credit Facility”) to, among other things, (a) extend the maturity date from June 22, 2025 to June 22, 2028 and (b) reduce the borrowing capacity from $600 million to $576 million through June 22, 2025, and thereafter reduce the borrowing capacity to $510 million through June 22, 2028.

See “ —Liquidity and Capital Resources—Sources and uses of liquidity .”

Secured debt issuance —In January 2023, we issued $525 million aggregate principal amount of 8.375% senior secured notes due February 2028 (the “8.375% Senior Secured Notes”), and we received $516 million aggregate cash proceeds, net of issue costs.

In January 2023, we issued $1.175 billion aggregate principal amount of 8.75% senior secured notes due February 2030 (the “8.75% Senior Secured Notes”), and we received $1.148 billion aggregate cash proceeds, net of issue costs.

In October 2023, we issued $325 million aggregate principal amount of 8.00% senior secured notes due September 2028 (the “8.00% Senior Secured Notes”), and we received $319 million aggregate cash proceeds, net of issue costs.

Debt issuance —In April 2024, we issued $900 million aggregate principal amount of 8.25% senior notes due May 2029 (the “8.25% Senior Notes”) and $900 million aggregate principal amount of 8.50% senior notes due May 2031 (the “8.50% Senior Notes”), and we received $1.77 billion aggregate cash proceeds, net of issue costs.

See “ —Liquidity and Capital Resources—Sources and uses of liquidity .”

Early debt retirement —In January 2023, in connection with the issuance of the 8.75% Senior Secured Notes, we made an aggregate cash payment of $1.159 billion, including a make-whole premium, to redeem the remaining outstanding $311 million, $240 million, $250 million, and $336 million aggregate principal amount of the 5.875% senior secured notes due January 2024, the 7.75% senior secured notes due October 2024, the 6.25% senior secured notes due December 2024 and the 6.125% senior secured notes due August 2025, respectively.

In the year ended December 31, 2023, we made a cash payment of $243 million to redeem an equivalent aggregate principal amount of the outstanding 5.375% senior secured notes due May 2023.

Debt tender offers —In April 2024, we made an aggregate cash payment of $886 million, including related costs, to complete tender offers (the “Tender Offers”) for $596 million and $249 million aggregate principal amount of the validly tendered 11.50% senior guaranteed notes due January 2027 (the “11.50% Senior Guaranteed Notes”) and 7.25% senior notes due November 2025 (the “7.25% Senior Notes”), respectively.

See “ —Liquidity and Capital Resources—Sources and uses of liquidity .”

Exchanged bonds —In the year ended December 31, 2023, holders of the outstanding $238 million aggregate principal amount of the 2.50% senior guaranteed exchangeable bonds due January 2027 (the “2.50% Senior Guaranteed Exchangeable Bonds”) exchanged such bonds under the terms of the governing indenture, and as part of the transactions, we delivered 38.6 million Transocean Ltd.

In October 2023, our wholly owned subsidiary, Transocean Inc., entered into individually negotiated agreements with holders of $60 million and $41 million aggregate principal amount of the 4.00% senior guaranteed exchangeable bonds due December 2025 (the “4.00% Senior Guaranteed Exchangeable Bonds”) and the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”), respectively and, as part of the transactions, we delivered 26.5 million Transocean Ltd.

shares to such holders.

Debt redemption —In April 2024, we made an aggregate cash payment of $658 million, including related costs, to fully redeem $569 million aggregate principal amount of 7.50% senior notes due January 2026 and partially redeem $87 million aggregate principal amount of 8.00% Senior Notes.

In the year ended December 31, 2024, we made an aggregate cash payment of $204 million to redeem the remaining $105 million aggregate principal amount of 7.25% Senior Notes and $91 million aggregate principal amount of 11.50% Senior Guaranteed Notes outstanding following the completion of the Tender Offers.

See “ —Liquidity and Capital Resources—Sources and uses of liquidity .”

Asset disposal and investment in unconsolidated affiliate —In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia , and related assets, with an estimated fair value of $85 million, in exchange for an equity ownership interest in Global Sea Mineral Resources NV (together with its subsidiaries, “GSR”).

In the year ended December 31, 2023, we recognized a loss of $169 million, which had no tax effect, associated with the disposal of the rig and related assets.

See “— Operating Results ,” “— Liquidity and Capital Resources—Sources and uses of liquidity ”.

Impairment and disposal of assets held for sale —In the year ended December 31, 2023, we recognized an aggregate loss of $57 million, which had no tax effect, associated with the impairment of the harsh environment floaters Paul B.

and Transocean Leader and related assets, which we determined were impaired at the time that we classified the assets as held for sale.

On February 15, 2024, we completed the sale of Paul B.

and Transocean Leader and related assets.

See “— Operating Results ” and “— Liquidity and Capital Resources—Sources and uses of liquidity .”

Drilling market —Our industry outlook is positive based upon underlying economic factors, including numerous long-term forecasts that indicate hydrocarbons will continue to be a critical source of energy for the foreseeable future, despite significant relative growth in alternative energy technologies, which remain less economical versus hydrocarbons.

Economic forecasts indicate that countries that are not members of the Organization for Economic Co-operation and Development will continue to experience population growth and improvement in living standards, which will compound the increase in energy demand for the foreseeable future.

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With deepwater and harsh environment fields generating favorable economic returns and relatively lower carbon intensity than other hydrocarbon sources, we expect a significant portion of the required spending in fossil fuel development will continue to be allocated to deepwater and harsh environment projects.

Although the price for oil may continue to exhibit volatility in response to several factors outside of our control, including uncertainty about future output from the major oil and gas producing countries, interest rate changes, geopolitical events and global economic growth, we nevertheless expect prices to remain at levels that are robustly supportive of investment in deepwater and harsh environment exploration and development projects.

Significantly reduced offshore contracting activity during the previous downcycle has also resulted in a much smaller marketable global fleet of floating rigs available to meet the current upcycle in expected customer demands, specifically with respect to the highest specification drilling units preferred by many of our customers for their projects.

In recent quarters, marketable supply and demand for deepwater and harsh environment rigs has become more balanced.

Customers are now planning further into the future to ensure availability of rigs for their drilling programs and are signing contracts with longer lead times and durations, as well as higher dayrates.

Although the price for oil may continue to exhibit volatility in response to factors outside of our control, including uncertainty about future output from the major oil and gas producing countries, interest rate changes, geopolitical events and global economic growth, we nevertheless expect prices to remain at levels that continue to be supportive of investment in deepwater and harsh environment exploration and development projects.

Significantly reduced offshore contracting activity during the previous downcycle has also resulted in a smaller marketable global fleet of floating rigs available to meet the current upcycle in expected customer demands, specifically with respect to the highest specification drilling units preferred by many of our customers for their projects.

Marketable supply and demand for ultra-deepwater and harsh environment rigs has become more balanced relative to prior periods.

We do, however, expect some increased pressure on utilization into 2026, as several of our competitors’ rigs have yet to obtain new commitments.

Our customers are planning further into the future to ensure availability of rigs for their drilling programs and are signing contracts with longer lead times and durations, as well as higher dayrates.

Our customers continue to pursue offshore projects in deepwater and harsh environments where rates of return and production volumes are anticipated to be very attractive, which is reflected in the resumption of postponed projects, commencement of new drilling and exploration campaigns and extensions of current drilling campaigns.

Offshore drilling activity remains robust in every major ultra-deepwater geographic sector.

Several new exploration and development programs have commenced as our customers return their focus to reserve replacement.

Consequently, tendering activity improved meaningfully during 2023 and several multi-year tenders and direct negotiations for work in Brazil, West Africa, North America and Australia were awarded.

Many tenders remain active and are expected to be awarded in the first half of 2024.

South America, the Gulf of Mexico and, increasingly, Africa are key ultra-deepwater market sectors.

In the last two years, we observed sustained increases in dayrates for projects in the U.S.

Gulf of Mexico and Brazil.

We continue to see these trends expand to other deepwater sectors.

In Norway, the largest market for harsh environment rigs, we anticipate demand will accelerate and extend through at least 2027, primarily due to previously enacted Norwegian tax incentive programs.

Several rigs have departed the region to work in other emerging harsh environment regions that require high-specification, high-efficiency semisubmersibles.

Contract durations, including subsequent extensions, on most of these units could make them unavailable to relocate for the foreseeable future.

We believe that these and other factors affecting supply and demand for drilling rigs are likely to have a favorable influence on dayrates and contracting terms as competition increases for high-specification, high-efficiency semisubmersibles.

As we project that this increased demand for both our asset groups will be sustained in the coming years, and as there are now fewer high-specification offshore drilling rigs capable of operating in these markets, we believe this demand may prompt the reactivation of cold-stacked rigs and the delivery of remaining stranded newbuild assets.

As of February 14, 2024, our contract backlog was $9.01 billion compared to $9.40 billion as of October 18, 2023.

The risks of drilling project delays, contract renegotiations and contract terminations and cancellations remain low as oil prices have stayed at levels that are supportive of investment in deepwater and harsh environment projects.

Offshore drilling activity remains robust in every major deepwater geographic sector.

Several new exploration and development programs have commenced, and our customers continue to be disciplined in their investment of capital and remain focused on project execution.

Tendering activity improved during 2024 in the golden triangle area, which comprises North America, South America and West Africa.

In Norway, the largest region for harsh environment rigs, we anticipate demand will accelerate and extend through the end of the decade.

Several of the high-specification semisubmersible rigs that departed the region to work in other emerging harsh environment regions may ultimately return to fulfill the anticipated increase in demand in Norway.

Contract durations, including subsequent extensions, on most of these units along with other factors affecting supply and demand for drilling rigs are likely to continue to have a favorable influence on dayrates and contracting terms as competition increases for high-specification semisubmersibles.

Fleet status —We refer to the availability of our rigs in terms of the uncommitted fleet rate.

The uncommitted fleet rate is defined as the number of uncommitted days divided by the total number of rig calendar days in the measurement period, expressed as a percentage.

An uncommitted day is defined as a calendar day during which a rig is idle or stacked, is not contracted to a customer and is not committed to a shipyard.

An uncommitted day is defined as a calendar day during which a rig is idle or stacked, is not contracted to a customer and is not committed

to a shipyard.

The uncommitted fleet rates exclude the effect of priced options.

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Performance and Other Key Indicators

Contract backlog —We believe our industry leading contract backlog sets us apart from the competition and provides indicators of our future revenue-earning opportunities.

Contract backlog is defined as the maximum contractual operating dayrate multiplied by the number of days remaining in the firm contract period, excluding revenues for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are not expected to be significant to our contract drilling revenues.

Contract backlog —We believe our industry leading contract backlog distinguishes us from the competition and provides indicators of our future revenue-earning opportunities.

The contract backlog represents the maximum contract drilling revenues that can be earned considering the contractual operating dayrate in effect during the firm contract period.

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Total contract backlog

Our contract backlog includes only firm commitments, including amounts associated with our contracted newbuild units under construction, which are represented by signed drilling contracts or, in some cases, by other definitive agreements awaiting contract execution.

Our contract backlog includes only firm commitments which are represented by signed drilling contracts or, in some cases, by other definitive agreements awaiting contract execution.

It does not include conditional agreements and options to extend firm commitments.

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

Additional factors that could affect the amount and timing of actual revenues to be recognized include customer liquidity issues and contract terminations that may be available to our customers under certain circumstances.

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

The contractual operating dayrate may be higher than the actual dayrate we ultimately receive because an alternative contractual dayrate, such as a waiting-on-weather rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances.

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Gain (loss) on retirement of debt

Loss before income tax expense

Income tax expense

Loss before income tax (expense) benefit

Income tax (expense) benefit

“nm” means not meaningful.

Contract drilling revenues —Contract drilling revenues increased for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the following:

(a) approximately $210 million resulting from higher average daily revenues, (b) approximately $190 million resulting from the operations of our newbuild ultra-deepwater floaters Deepwater Atlas and Deepwater Titan placed into service in the two-year period ended December 31, 2023, (c) approximately $25 million resulting from slightly improved efficiency for the fleet, (d) approximately $25 million resulting from higher reimbursement revenues and (e) approximately $10 million resulting from increased early termination revenues.

(a) approximately $470 million resulting from increased utilization, (b) approximately $275 million resulting from improved average daily revenues, (c) approximately $140 million resulting from the operations of our newbuild ultra-deepwater floaters Deepwater Titan and Deepwater Aquila , (d) approximately $70 million resulting from increased activity for the operations of Transocean Norge and (e) $48 million resulting from decreased amortization of contract intangible assets.

These increases were partially offset by the following:

(a) approximately $180 million resulting from reduced utilization, primarily for our harsh environment floaters that were under mobilization or contract preparation for their next contract and (b) approximately $25 million resulting from cold stacking Deepwater Nautilus .

(a) approximately $200 million resulting from rigs sold or classified as held for sale, (b) approximately $50 million resulting from decreased revenue efficiency for the comparable active fleet and (c) approximately $35 million resulting from early termination fees in the year ended December 31, 2023 with no comparable activity in the current-year period and (d) approximately $20 million resulting from unfavorable currency exchange rates.

Costs and expenses —Operating and maintenance costs and expenses increased for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the following:

(a) approximately $140 million resulting from reactivation and contract preparation, (b) approximately $85 million resulting from our two newbuild ultra-deepwater floaters placed into service, (c) approximately $55 million resulting from the effect of inflation on personnel and maintenance costs, (d) approximately $40 million resulting from various litigation, customs duties and indirect taxes and (e) approximately $25 million resulting from higher reimbursable costs.

(a) approximately $310 million resulting from increased operating activity, (b) approximately $70 million resulting from the operations of Deepwater Titan and Deepwater Aquila , (c) approximately $65 million resulting from incremental in-service costs related to additional subcontracted services, (d) approximately $60 million resulting from the effect of inflation on personnel and other operating costs, (e) approximately $30 million resulting from the operations of Transocean Norge , and (f) approximately $15 million resulting from increased out-of-service costs.

These increases were partially offset by the following:

(a) approximately $35 million resulting from cold stacking Deepwater Nautilus and (b) approximately $15 million resulting from the favorable effect of currency exchange rates on personnel costs.

Depreciation and amortization expense increased for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to (a) $48 million of increased depreciation associated with our newbuild ultra-deepwater floaters and other property and equipment placed into service since December 2022, partially offset by (b) $23 million of reduced depreciation resulting from the disposal of one rig and the classification of two rigs as held for sale and (c) approximately $12 million of reduced depreciation resulting from assets that had reached the end of their useful lives or had been retired.

(a) approximately $180 million resulting from rigs sold or classified as held for sale, (b) approximately $100 million resulting from lower costs incurred during contract preparation, (c) approximately $25 million resulting from increased favorable settlements of various litigation and contingencies and (d) approximately $20 million resulting from favorable currency exchange rates.

Depreciation and amortization expense decreased for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to (a) $33 million resulting from rigs sold, contributed or classified as held for sale and (b) $12 million resulting from assets that had reached the end of their useful lives or had been retired, partially offset by an increase of (c) $40 million resulting from three newbuild ultra-deepwater floaters, one acquired harsh environment floater and other property and equipment placed into service.

General and administrative costs and expenses increased for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the following:

(a) approximately $16 million resulting from increased personnel costs, partially offset by (c) approximately $8 million resulting from reduced innovation costs and (d) approximately $4 million resulting from reduced legal and professional fees.

Loss on impairment or disposal of assets —In the year ended December 31, 2023, we recognized a loss associated with the impairment of two harsh environment floaters, which we determined were impaired at the time we classified them as held for sale.

In the year ended December 31, 2023, we recognized a loss of $169 million associated with our non-cash contribution of Ocean Rig Olympia and related assets in exchange for an equity ownership interest in GSR.

In the years ended December 31, 2023 and

2022, we recognized an aggregate net loss of $14 million and $10 million, respectively, associated with the disposal of assets unrelated to rig sales.

Other income and expense —Interest expense, net of amounts capitalized, increased in the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the following:

(a) $189 million resulting from debt issued in the two-year period ended December 31, 2023 and (b) $34 million resulting from reduced interest costs capitalized for our newbuild construction program, partially offset by (c) $113 million resulting from debt repaid as scheduled or early retired and (d) $30 million resulting from the fair value adjustment of the bifurcated compound exchange feature embedded in the indenture governing the 4.625% Senior Guaranteed Exchangeable Bonds.

In the year ended December 31, 2023, we recognized a net loss on retirement of debt, primarily associated with the early retirement of $1.38 billion aggregate principal amount of our debt securities.

In the year ended December 31, 2022, we recognized a net gain on the retirement of debt, primarily associated with the early retirement of $116 million aggregate principal amount of our debt securities in connection with exchange and purchase agreements.

(a) $17 million resulting from increased personnel costs, primarily resulting from costs associated with the early retirement of certain personnel, and (b) $13 million resulting from increased legal and professional fees.

Loss on impairment or disposal of assets —In the year ended December 31, 2024, we recognized a loss of $772 million associated with the impairment of Deepwater Nautilus , Development Driller III and Discoverer Inspiration , together with related assets.

the year ended December 31, 2023, we recognized a loss of $57 million associated with the impairment of Paul B.

and Transocean Leader , together with related assets.

In the year ended December 31, 2023, we recognized a loss of $169 million associated with our non-cash contribution of ultra-deepwater floater Ocean Rig Olympia and related assets in exchange for an equity ownership interest in Global Sea Mineral Resources NV.

In the years ended December 31, 2024 and 2023, we recognized an aggregate net loss of $16 million and $14 million, respectively, associated with the disposal of assets unrelated to rig sales.

Other income and expense —Interest expense, net of amounts capitalized, decreased in the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the following:

(a) $342 million decreased interest resulting from the fair value adjustment of the bifurcated compound exchange feature embedded in the indenture governing the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”) and (b) $75 million decreased interest resulting from debt repaid as scheduled or early retired, partially offset by, (c) $133 million increased interest resulting from debt issued and (d) $24 million increased interest resulting from reduced interest costs capitalized for our recently completed newbuild construction program.

In the year ended December 31, 2024, we recognized a net gain on retirement of debt as follows:

(a) a net gain of $144 million resulting from retirement of notes validly tendered in the Tender Offers and (b) a net gain of $17 million resulting from the redemption of $852 million aggregate principal amount of our debt securities.

In the year ended December 31, 2023, we recognized a net loss primarily resulting from the redemption of $1.38 billion aggregate principal amount of our debt securities.

Other income net, increased in the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the following:

(a) an increased gain of $18 million resulting from net changes to currency exchange rates, (b) increased income of $17 million associated with our dual-activity patent and (c) increased income of $8 million related to the non-service components of net periodic benefit income, partially offset by (e) a loss of $27 million associated with a payment of cash or the issuance of additional shares to certain holders that elected to exercise their exchanges rights for the 4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds in the year ended December 31, 2023.

Income tax expense —In the years ended December 31, 2023 and 2022, our effective tax rate was (1.4) percent and (10.4) percent, respectively, based on loss before income tax expense.

(a) a loss of $27 million associated with a payment of cash or the issuance of additional shares to certain holders that elected to exercise their exchanges rights for the 4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds in the year ended December 31, 2023 with no comparable activity in the current year, b) decreased losses of $19 million related to our equity investments in unconsolidated affiliates and (c) an increased gain of $6 million related to net changes to currency exchange rates, partially offset by (d) decreased income of $19 million related to our dual-activity patent.

Income tax expense —In the years ended December 31, 2024 and 2023, our effective tax rate was 2.2 percent and (1.4) percent, respectively, based on loss before income tax expense or benefit.

In the years ended December 31, 2024 and 2023, the aggregate effect of discrete period tax items was a net tax benefit of $158 million and $74 million, respectively.

In the year ended December 31, 2024, discrete items included changes to deferred taxes resulting from operational and structural changes related to rig movements and asset impairments, changes to valuation allowances and settlements and expirations of various uncertain tax positions.

In the year ended December 31, 2023, such discrete items included settlements and expirations of various uncertain tax positions, changes to valuation allowances and changes to deferred taxes due to new rig operations.

In the year ended December 31, 2022, such discrete items included settlement and expiration of various uncertain tax positions, changes to valuation allowances, operational restructuring and gains due to exchange rate changes.

In the years ended December 31, 2023 and 2022, our effective tax rate, excluding discrete items, was (13.3) percent and (13.6) percent, respectively, based on loss before income tax expense.

In the year ended December 31, 2023 compared to the year ended December 31, 2022, our effective tax rate increased primarily due to changes in the relative blend of income from operations in certain jurisdictions.

In the years ended December 31, 2024 and 2023, our effective tax rate, excluding discrete items, was 159.1 percent and (13.3) percent, respectively, based on loss before income tax expense or benefit.

In the year ended December 31, 2024 compared to the year ended December 31, 2023, our effective tax rate excluding discrete items increased primarily due to changes in the relative blend of income from operations in certain jurisdictions.

Due to our operating activities and organizational structure, our income tax expense does not change proportionally with our income before income taxes.

Significant decreases in our income before income taxes typically lead to higher effective tax rates, while significant increases in income before income taxes can lead to lower effective tax rates, subject to the other factors impacting income tax expense noted above.

With respect to the effective tax rate calculation for the year ended December 31, 2023, a significant portion of our income tax expense was generated in countries in which income taxes are imposed or treated to be imposed on gross revenues, with the most significant of these countries being Angola and India.

Conversely, the countries in which we incurred the most significant income taxes during this period that were based on income before income tax include the U.S., Hungary, Brazil, Cyprus, Australia, Norway and Switzerland.

We may have subsidiaries with tax expense on taxable earnings that exceeds the tax benefits in other jurisdictions, or vice versa, which sometimes results in a negative effective tax rate or unusually large effective tax rates relative to consolidated income or loss before income taxes.

Our rig operating structures further complicate our tax calculations, especially in instances where we have more than one operating structure for the taxing jurisdiction and, thus, more than one method of calculating taxes depending on the operating structure utilized by the rig under the contract.

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Sources and uses of cash

In the year ended December 31, 2023, our primary sources of cash were net cash proceeds from issuance of debt and net cash provided by our operating activities.

In the year ended December 31, 2024, our primary sources of cash were net cash proceeds from issuance of debt, net cash provided by our operating activities and net cash proceeds from disposal of assets.

Our primary uses of cash were debt repayments and capital expenditures.

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Changes in operating assets and liabilities, net

Net cash provided by operating activities decreased primarily due to (a) increased disbursements made in connection with contract preparation and mobilization activities for rigs under new or upcoming contracts, (b) increased cash paid for interest and (c) increased cash paid to employees, partially offset by (d) reduced cash paid for income taxes.

Net cash provided by operating activities increased primarily due to increased cash collected from customers, partially offset by increased cash paid to suppliers and increased cash paid for interest.

Years ended December 31,

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Capital expenditures

Investments in equity of unconsolidated affiliates

Investment in loans to unconsolidated affiliates

Proceeds from disposal of assets, net

Investments in debt and equity of unconsolidated affiliates

Proceeds from disposal of assets, net of costs to sell

Cash acquired in acquisition of unconsolidated affiliate

Net cash used in investing activities decreased primarily due to (a) reduced capital expenditures associated with our newbuild construction program and (b) reduced cash invested in the equity and debt of our unconsolidated affiliates, partially offset by (c) increased capital expenditures associated with maintenance, reactivation and contract preparation activities.

Net cash used in investing activities decreased primarily due to reduced capital expenditures associated with our newbuild construction program and increased proceeds from disposal of one ultra-deepwater floater and two harsh environment floaters in the year ended December 31, 2024.

Years ended December 31,

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Proceeds from issuance of debt, net of issue costs

Proceeds from issuance of shares, net of issue costs

Proceeds from issuance of warrants, net of issue costs

Net cash provided by financing activities increased primarily due to (a) net cash proceeds from the issuance of $1.175 billion aggregate principal amount of 8.75% Senior Secured Notes, $525 million aggregate principal amount of 8.375% Senior Secured Notes and $325 million aggregate principal amount of 8.00% Senior Secured Notes in the year ended December 31, 2023, and (b) decreased cash used to repay debt in scheduled installments, partially offset by (c) early repayments of $1.38 billion aggregate principal amount of certain of our debt securities in the year ended December 31, 2023 compared to early repayments of $77 million aggregate principal amount in the prior year.

Net cash used in financing activities increased primarily due to (a) increased net cash used to early retire $1.70 billion aggregate principal amount of certain of our debt securities in tender offers and redemptions completed in the year ended December 31, 2024 compared to net cash used to redeem $1.38 billion aggregate principal amount of certain of our debt securities in the prior year and (b) reduced net cash proceeds from the issuance of $900 million aggregate principal amount of 8.25% Senior Notes and $900 million aggregate principal amount of 8.50% Senior Notes in the year ended December 31, 2024 compared to net cash proceeds from the issuance of $1.175 billion aggregate principal amount of 8.75% senior secured notes due February 2030, $525 million aggregate principal amount of 8.375% senior secured notes due February 2028 and $325 million aggregate principal amount of 8.00% senior secured notes due September 2028 in the prior year.

Sources and uses of liquidity

Overview —We expect to use existing unrestricted cash balances, cash flows from operating activities, borrowings under our Secured Credit Facility or proceeds from the disposal of assets or the issuance of debt or shares to fulfill anticipated near-term obligations, which may include capital expenditures, working capital and other operational requirements, scheduled debt maturities or other payments.

Overview —We expect to use existing unrestricted cash balances, cash flows from operating activities, borrowings under our Secured Credit Facility, proceeds from disposal of assets or proceeds from the issuance of debt or shares to fulfill anticipated near-term obligations, which may include capital expenditures, working capital and other operational requirements, scheduled debt maturities or other debt-related deposits or reservations of unrestricted cash.

At December 31, 2024, we had $560 million in unrestricted cash and cash equivalents and $381 million in restricted cash and cash equivalents.

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For example, among other factors, if we incur costs for reactivation or contract preparation of multiple rigs or to otherwise assure the marketability of our fleet or general economic, financial, industry or business conditions deteriorate, our cash flows from operations may be reduced or negative.

Additionally, we have a bank credit agreement for a credit facility, secured by, among other things, a lien on nine of our ultra-deepwater floaters and two of our harsh environment floaters (as amended from time to time, the “Secured Credit Facility”).

Our Secured Credit Facility provides us with a borrowing capacity of $600 million through its scheduled maturity on June 22, 2025, and contains restrictive covenants, including a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0 and a minimum liquidity requirement of $500 million, among others.

We have a Secured Credit Facility that provides us with a borrowing capacity of $576 million through June 22, 2025 and $510 million through its maturity on June 22, 2028.

Our Secured Credit Facility, which is secured by, among other things, a lien on eight of our ultra-deepwater floaters and two of our harsh environment floaters, contains certain restrictive covenants, including a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0 and a minimum liquidity requirement of $200 million, among others.

The Secured Credit Facility also restricts the ability of Transocean Ltd.

and certain of our subsidiaries to, among other things, merge, consolidate or otherwise make changes to the corporate structure, incur liens, incur additional indebtedness, enter into transactions with affiliates and permits, subject to certain conditions, the ability to pay dividends and repurchase our shares.

For more information about the restrictions in our Secured Credit Facility and maturity triggers thereof, as well as on our scheduled debt maturities in 2025 and beyond, see Notes to Consolidated Financial Statements— Note 8—Debt .

Although we currently anticipate relying on these sources of liquidity, including cash flows from operating activities and borrowings under our Secured Credit Facility, among others, we may in the future consider establishing additional financing arrangements with banks or other capital providers, including shipyard loans, and subject to market conditions and other factors, we may be required to provide collateral for any such future financing arrangements.

Additionally, we have from time to time relied on issuances of equity or equity-linked securities.

For more information about our issuances of equity securities, see Notes to Consolidated Financial Statements— Note 9—Debt and Notes to Consolidated Financial Statements— Note 14—Equity .

Although we currently anticipate relying on these sources of liquidity, including cash flows from operating activities and borrowings under our Secured Credit Facility, among others, we may in the future consider establishing additional financing arrangements with banks or other capital providers and subject to market conditions and other factors, we may be required to provide collateral for any such future financing arrangements.

Our secured indentures include collateral rig leverage ratios, and in the past, during periods when certain of these rigs have experienced reduced levels of operating efficiency or utilization, we have deposited unrestricted cash into the applicable debt service reserve account to maintain compliance with the applicable covenant.

We may in the future deposit a portion of our unrestricted cash or, in lieu thereof, take other actions, including seeking covenant relief or other consents of holders of certain of our secured debt, as applicable.

For more information about our indentures and our debt and equity securities, see Notes to Consolidated Financial Statements— Note 8—Debt and Notes to Consolidated Financial Statements— Note 13—Equity .

Debt and equity markets —From time to time, we seek to access the capital markets, including with respect to potential liability management transactions.

For example, during the three-year period ended December 31, 2023, we completed multiple debt and equity transactions, including the redemption, exchanges and retirement of existing debt, in connection with our ongoing efforts to prudently manage our capital structure and improve our liquidity position.

Subject to then-existing market conditions and our expected liquidity needs, among other factors, we may use existing unrestricted cash balances, our cash flows from operating activities, or proceeds from asset sales to pursue liability management transactions, including among others, purchasing or exchanging any of our debt or equity-linked securities in

the open market, in privately negotiated transactions, or through tender or exchange offers, or by redeeming any of our outstanding debt securities pursuant to the terms of the applicable governing document, if applicable.

For example, we have completed multiple debt and equity transactions, including tender offers, redemptions, exchanges and retirement of existing debt, in connection with our ongoing efforts to prudently manage our capital structure and improve our liquidity position.

Subject to then-existing market conditions and our expected liquidity needs, among other factors, we may use existing unrestricted cash balances, cash flows from operating activities, or proceeds from asset sales to pursue liability management transactions, including among others, purchasing or exchanging any of our debt or equity-linked securities in the open market, in privately negotiated transactions, or through tender or exchange offers, or by redeeming any of our outstanding debt securities pursuant to the terms of the applicable governing document, if applicable.

Any future purchases, exchanges or other transactions may be on the same terms or on terms that are more or less favorable to holders than the terms of any prior transaction.

We can provide no assurance as to which, if any, of these alternatives, or combinations thereof, we may choose to pursue in the future, if at all, or as to the timing with respect to any future transactions.

For more information about our previous debt repayment, redemption and retirement transactions during the three-year period ended December 31, 2023, see Notes to Consolidated Financial Statements— Note 9—Debt .

For more information about our debt and equity transactions during the three-year period ended December 31, 2024, see Notes to Consolidated Financial Statements— Note 8—Debt .

Our ability and willingness to access the debt and equity markets is a function of a variety of factors, including, among others, general economic, industry or market conditions, market perceptions of us and our industry and credit rating agencies’ views of our debt.

General economic or market conditions could have an adverse effect on our business and financial position and on the business and financial position of our customers, suppliers and lenders and could affect our ability to access the capital markets on acceptable terms or at all and our future need or ability to borrow under our Secured Credit Facility.

In addition to our potential sources of funding, the effects of such global events could impact our liquidity or need to alter our allocation or sources of capital, implement further cost reduction measures and change our financial strategy.

In addition to our potential sources of funding, the effects of such global events could impact our liquidity or cause us to need to alter our allocation or sources of capital, implement further cost reduction measures and change our financial strategy.

Additionally, the rating of our long-term debt is below investment grade, which is causing us to experience increased fees and interest rates under our Secured Credit Facility and indentures governing certain of our senior notes.

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We may also consider investments related to major rig upgrades, new rig construction, or the acquisition of a rig under construction.

Any such acquisition or investment could involve the payment by us of a substantial amount of cash or the issuance of a substantial number of additional shares or other securities.

Any such acquisition or investment has involved, and in the future could involve, the payment by us of a substantial amount of cash or the issuance of a substantial number of additional shares or other securities.

Our failure to subsequently secure drilling contracts in these instances, if not already secured, could have an adverse effect on our results of operations or cash flows.

In the years ended December 31, 2023 and 2022, we made capital expenditures of $427 million and $717 million, respectively, including $331 million and $669 million, respectively, for our newbuild construction projects.

The historical and projected capital expenditures and non-cash capital additions for our ongoing newbuild construction projects were as follows:

costs for the

(in millions)

Deepwater Aquila (a)

Deepwater Titan (b)

Deepwater Atlas (c)

(a) In September 2023, we acquired Deepwater Aquila , an ultra-deepwater drillship under construction for Liquila, a previously unconsolidated variable interest entity, by acquiring the outstanding ownership interests in Liquila.

The seventh generation, high-specification drillship is designed to be equipped with our patented dual activity, a 1,400 short-ton hookload, large deck space, high load capacities and will be dual-stack ready.

The rig is expected to commence operations under its drilling contract in mid-2024.

(b) In May 2023, we completed construction of the ultra-deepwater drillship Deepwater Titan , and it commenced operations under its drilling contract.

Deepwater Titan is equipped with two 20,000 pounds per square inch blowout preventers and other equipment required by our customer.

(c) In October 2022, we completed construction of the ultra-deepwater drillship Deepwater Atlas , and it commenced the first of two phases of operations using a 15,000 pounds per square inch blowout preventer.

In October 2023, the rig completed installation of a 20,000 pounds per square inch blowout preventer and related equipment, and is expected to return to service in the first half of 2024.

In June 2024, we completed construction of Deepwater Aquila , and it commenced operations under its drilling contract.

The seventh generation, high-specification drillship is equipped with our patented dual activity, a 1,400 short-ton hookload, large deck space, high load capacities and is dual-stack ready.

The full scope of the construction project for the rig and related assets was completed for a total cost of $440 million.

The ultimate amount of our capital expenditures is partly dependent upon financial market conditions, the actual level of operational and contracting activity, the costs associated with the current regulatory environment and customer requested capital improvements and equipment for which the customer agrees to reimburse us.

As with any major shipyard project that takes place over an extended period of time, the actual costs, the timing of expenditures and the project completion date may vary from estimates based on numerous factors, including actual contract terms, weather, exchange rates, shipyard labor conditions, availability of suppliers to recertify equipment and the market demand for components and resources required for drilling unit construction.

As with any major shipyard project that takes place over an extended period, the actual costs, the timing of expenditures and the project completion date may vary from estimates based on numerous factors, including actual contract terms, weather, exchange rates, shipyard labor conditions, availability of suppliers to recertify equipment and market demand for required components and resources.

We intend to fund the cash requirements for our projected capital expenditures by using available cash balances, cash generated from operations and asset sales, borrowings under our Secured Credit Facility and financing arrangements with banks or other capital providers.

Economic conditions and other factors could impact the availability of these sources of funding.

See “— Sources and uses of liquidity .”

From time to time, we may also review the possible disposition of certain drilling assets.

During the year ended December 31, 2023, we made a non-cash contribution of an ultra-deepwater floater, together with related assets and a cash contribution of $10 million, as consideration for an equity ownership interest in an unconsolidated affiliate.

Additionally, on February 15, 2024, we completed the sale of two harsh environment floaters.

Considering market conditions, we have previously committed to plans to sell certain lower specification

drilling units for scrap value, and we may identify additional lower-specification drilling units to be sold for scrap, recycling or alternative purposes.

During the year ended December 31, 2024, we completed the sale of one ultra-deepwater floater and two harsh environment floaters.

Considering market conditions, we have previously committed to plans to sell certain lower specification drilling units for scrap value, and we may identify additional lower-specification drilling units to be sold for scrap, recycling or alternative purposes.

See Notes to Consolidated Financial Statements — Note 6 — Long-Lived Assets.

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

◾ For additional information regarding the obligations to our employees under our various postemployment benefit plans, see Notes to Consolidated Financial Statements— Note 10—Postemployment Benefit Plans .

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

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

◾ For additional information regarding our obligations under long-term purchase agreements and service agreements and our material contingencies, see Notes to Consolidated Financial Statements— Note 13—Commitments and Contingencies .

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

Other commercial commitments —We have other commercial commitments, such as standby letters of credit and surety bonds that guarantee our performance as it relates to our drilling contracts, insurance, customs, tax and other obligations in various jurisdictions.

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For additional information regarding our standby letters of credit and surety bond guarantees, see Notes to Consolidated Financial Statements — Note 12 — Commitments and Contingencies .

Related Party Transactions

In April 2023, Perestroika AS (together with its subsidiaries, “Perestroika”), an entity affiliated with one of our directors that beneficially owns approximately 11 percent of our shares, exchanged $213 million aggregate principal amount of the 2.50% Senior Guaranteed Exchangeable Bonds under the terms of the governing indenture at the applicable exchange rate of 162.1626 Transocean Ltd.

shares per $1,000 note.

As part of the transaction governing the exchange, we delivered 34.6 million Transocean Ltd.

shares and additional immaterial cash consideration to such exchanging holder.

The director’s beneficial ownership of our shares resulting from these transactions did not change.

See Notes to Consolidated Financial Statements—Note 9—Debt .

In September 2023, we issued 11.9 million Transocean Ltd.

shares with an aggregate value of $99 million, which included 2.0 million Transocean Ltd.

shares with an aggregate value of $16.4 million issued to Perestroika, to acquire the outstanding ownership interests in Liquila, and as a result, Liquila became our wholly owned subsidiary.

See Notes to Consolidated Financial Statements— Note 4—Unconsolidated Affiliates .

We engage in certain related party transactions with our unconsolidated affiliates.

Our most significant transactions with our unconsolidated affiliates are under agreements with Orion Holdings (Cayman) Limited as follows:

(a) we operate, stack and maintain Transocean Norge under a management services agreement, (b) we market Transocean Norge under a marketing services agreement and (c) during operations, we lease Transocean Norge under a bareboat charter agreement.

Additionally, we procure and provide services and equipment from and to other unconsolidated affiliates for technological innovation and subsea minerals exploration.

See Notes to Consolidated Financial Statements—Note 4—Unconsolidated Affiliates .

Critical Accounting Policies and Estimates

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We have discussed the development, selection and disclosure of such policies and estimates with the audit committee of our board of directors.

For information about our significant accounting policies and accounting standards updates, see Notes to Consolidated Financial Statements— Note 2—Significant Accounting Policies .

For information about our significant accounting policies and accounting standards updates, see Notes to Consolidated Financial Statements— Note 2—Significant Accounting Policies and Notes to Consolidated Financial Statements— Note 3—Accounting Standards Updates .

Overview —We provide for income taxes based on expected taxable income, statutory rates and tax laws in the jurisdictions in which we operate or have a taxable presence.

The relationship between our provision for or benefit from income taxes and our income or loss before income taxes can vary significantly from period to period considering, among other factors, (a) the overall level of income before income taxes, (b) changes in the blend of income that is taxed based on gross revenues rather than income before taxes, (c) rig movements

between taxing jurisdictions and (d) our rig operating structures.

Consequently, our income tax expense does not change proportionally with our income or loss before income taxes.

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Although we employ the best information available at the time we prepare our annual tax provision, a number of years may elapse before the tax liabilities in the various jurisdictions are ultimately determined.

We are undergoing examinations of our tax returns in a number of taxing jurisdictions for various years.

Our tax returns are undergoing examinations in a number of taxing jurisdictions covering various years.

We review our liabilities on an ongoing basis and, to the extent audits or other events cause us to adjust the liabilities accrued in prior periods, we recognize those adjustments in the period of the event.

Our tax liabilities are dependent on numerous factors that cannot be reasonably projected, including among others, the amount and nature of additional taxes potentially asserted by local tax authorities;

Our potential tax liabilities are dependent on numerous factors that cannot be reasonably projected, including among others, the amount and nature of additional taxes potentially asserted by local tax authorities;

the willingness of local tax authorities to negotiate a fair settlement through an administrative process;

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Consequently, we cannot reasonably estimate the future impact of changes to the assumptions and estimates related to our annual tax provision.

Unrecognized tax benefits —We establish liabilities for estimated tax exposures, and the provisions and benefits resulting from changes to those liabilities are included in our annual tax provision along with related interest and penalties.

Such tax exposures include potential challenges to intercompany pricing, disposition transactions, and withholding tax rates and their applicability.

These exposures may be affected by changes in applicable tax law or other factors, which could cause us to revise our prior estimates, and are generally resolved through the settlement of audits within these tax jurisdictions or by judicial means.

Unrecognized tax benefits —We establish liabilities for estimated tax exposures, and we recognize the provisions and benefits resulting from changes to those liabilities, together with related interest and penalties, in income tax expense or benefit.

Income tax exposure items include potential challenges to permanent establishment positions, intercompany pricing, disposition transactions, and withholding tax rates and their applicability.

Such tax exposures may be affected by changes in applicable tax law or other factors, which could cause us to revise our prior estimates, and are generally resolved through the settlement of audits within the tax jurisdictions or by judicial means.

At December 31, 2024 and 2023, we had unrecognized tax benefits of $414 million and $458 million, respectively, including interest and penalties, against which we recorded net operating loss deferred tax assets of $372 million and $411 million, respectively, resulting in net unrecognized tax benefits of $42 million and $47 million, respectively, including interest and penalties, that upon reversal would favorably impact our effective tax rate.

Valuation allowance —We apply significant judgment to determine whether our deferred tax assets will be fully or partially realized.

Our evaluation requires us to consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses in recent years.

We continually evaluate opportunities for the future utilization of our deferred tax assets.

When it is estimated to be more likely than not that all or some portion of certain deferred tax assets, such as foreign tax credit carryovers or net operating loss carryforwards, will not be realized, we establish a valuation allowance for the amount of the deferred tax assets that is considered to be unrealizable.

To evaluate our ability to realize deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses in recent years.

We continually evaluate opportunities to utilize our deferred tax assets.

We record a valuation allowance for deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.

For example, we may record a valuation allowance for deferred tax assets resulting from net operating

losses incurred during the year in certain jurisdictions for which the benefit of the losses will not be realized or for foreign tax credit carryforwards that may expire prior to their utilization.

During the years ended December 31, 2024 and 2023, in connection with our evaluation of the projected realizability of our deferred tax assets, we determined that our consolidated cumulative loss incurred over the recent three-year period has limited our ability to consider other subjective evidence, such as projected contract activity rather than contract backlog.

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Property and equipment

Overview —We apply significant judgment to account for our property and equipment, consisting primarily of offshore drilling rigs and related equipment, related to estimates and assumptions for cost capitalization, useful lives and salvage values.

At December 31, 2024 and 2023, the carrying amount of our property and equipment was $15.83 billion and $16.94 billion, respectively, representing 82 percent and 84 percent, respectively, of our total assets.

Capitalized costs —We capitalize costs incurred to enhance, improve and extend the useful lives of our property and equipment and expense costs incurred to repair and maintain the existing condition of our rigs.

For newbuild construction projects, we also capitalize the initial preparation, mobilization and commissioning costs incurred until the drilling unit is placed into service.

Cost capitalization affects our results of operations by reducing expenses in the period incurred and increasing depreciation expense over the useful life of the asset.

Useful lives and salvage values —We depreciate our assets using the straight-line method over their estimated useful lives after allowing for salvage values.

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Potential impairment indicators include rapid declines in commodity prices and related market conditions, declines in dayrates or utilization, cancellations of contracts or credit concerns of multiple customers.

During periods of oversupply, we may idle or stack rigs for extended periods of time or we may elect to sell certain rigs for scrap, which could be an indication that an asset group may be impaired since supply and demand are the key drivers of rig utilization and our ability to contract our rigs at economical rates.

During periods of oversupply, we may idle or stack rigs for extended periods of time until market conditions change, or we may elect to sell certain rigs for scrap, which in combination with other indicators above, could be an indication that an asset group may be impaired since supply and demand are the key drivers of rig utilization and our ability to contract our rigs at economical rates.

Our rigs are mobile units, equipped to operate in geographic regions throughout the world and, consequently, we may mobilize rigs from an oversupplied region to a more lucrative and undersupplied region when it is economical to do so.

Many of our contracts generally allow our customers to relocate our rigs from one geographic region to another, subject to certain conditions, and our customers utilize this capability to meet their worldwide drilling requirements.

Accordingly, our rigs are considered to be interchangeable within classes or asset groups, and we evaluate impairment by asset group.

Accordingly, our rigs are considered to be interchangeable within each asset group, and we evaluate impairment by asset group.

We consider our asset groups to be ultra-deepwater floaters and harsh environment floaters.

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These projections involve uncertainties that rely on assumptions about demand for our services, future market conditions and technological developments.

Because our business is cyclical in nature, the results of our impairment testing are expected to vary significantly depending on the timing of the assessment relative to the business cycle.

Altering either the timing of or the assumptions used to estimate fair value and significant unanticipated changes to the assumptions could materially alter an outcome that could otherwise result in an impairment loss.

Because our business is cyclical, the results of our impairment testing are expected to vary significantly depending on the timing of the assessment relative to the business cycle.

Altering either the timing of or the assumptions used to estimate fair value and development of significant unanticipated changes to the assumptions could materially alter an outcome that could otherwise result in an impairment loss.

Given the nature of these evaluations and their application to specific asset groups and specific time periods, it is not possible to reasonably quantify the impact of changes in these assumptions.

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Other Matters

Related party transactions

During the year ended December 31, 2024, we entered into certain related party transactions with our unconsolidated affiliates.

For additional information regarding our related party transactions, see Notes to Consolidated Financial Statements— Note 4—Unconsolidated Affiliates and Notes to Consolidated Financial Statements— Note 8—Debt .

Regulatory matters

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We intend to defend our tax positions vigorously.

Although we can provide no assurance as to the outcome of the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our consolidated statement of financial position or results of operations;

however, it could have a material adverse effect on our consolidated statement of cash flows.

however, it could have a material adverse effect on our cash flows.

See Notes to Consolidated Financial Statements— Note 10—Income Taxes .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis