What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-18 · 114 added, 112 removed, 234 unchanged (49% 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 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.

As of February 17, 2026, we owned or had partial ownership interests in and operated 27 mobile offshore drilling units, consisting of 20 ultra-deepwater drillships and seven harsh environment semisubmersibles.

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

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.

Agreement to acquire Valaris —On February 9, 2026, we and Valaris Limited, an exempted company limited by shares incorporated under the laws of Bermuda ("Valaris"), entered into a Business Combination Agreement (the "Agreement") providing for the combination of Transocean and Valaris (the "Business Combination").

Pursuant to the Agreement, and on the terms and subject to the conditions thereof, we will acquire all of the issued and outstanding common shares, par value $0.01 each, of Valaris (the “Valaris Shares”) in exchange for Transocean Ltd.

shares, par value $0.10 each, at an exchange ratio of 15.235 Transocean Ltd.

shares for each Valaris Share.

See Notes to Consolidated Financial Statements— Note 1—Business .

Held-for-sale asset impairments —In the year ended December 31, 2025, we recognized an aggregate loss of $3.05 billion ($3.04 billion, or $3.16 per diluted share, net of tax), associated with the impairment of six ultra-deepwater floaters and one harsh environment floater, together with related assets, which we determined were impaired at the time we classified the assets as held for sale, and two ultra-deepwater floaters, together with related assets, which we previously classified as held for sale and determined the assets were further impaired.

See “ —Operating Results .”

Disposal of assets —In the year ended December 31, 2025, we completed the sale of the ultra-deepwater floaters Development Driller III, Discoverer Americas , Discoverer Clear Leader , Discoverer Inspiration , Discoverer Luanda and GSF Development Driller I , together with related assets, for aggregate net cash proceeds of $71 million.

In January 2026, we completed the sale of the ultra-deepwater drillship Discoverer India , together with related assets, for aggregate net cash proceeds of $14 million, including $1 million received as a deposit in the year ended December 31, 2025.

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

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.

Share issuance —In September 2025, we issued 143.8 million Transocean Ltd.

shares and received $421 million aggregate cash proceeds, net of issue costs.

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

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.

Debt issuance —In October 2025, we issued $500 million aggregate principal amount of 7.875% senior guaranteed notes due October 2032 (the “7.875% Senior Guaranteed Notes”) and received $492 million aggregate cash proceeds, net of issue costs.

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

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.

Debt redemption —In October 2025, we made an aggregate cash payment of $903 million, including related costs, to fully redeem $655 million aggregate principal amount of 8.00% senior notes due February 2027 and $248 million aggregate principal amount of 6.875% senior secured notes due February 2027.

See “— 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.

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.

We believe that these factors will contribute to robust demand for oil and gas.

The existing supply of oil and gas is depleting and requires replenishment.

The replacement of reserves remains critically important given the significant underinvestment during the last several years and the challenges to new exploration and production investments imposed on many industry participants by investors and the governments of oil and gas producing nations.

Additionally, energy security will remain an important geopolitical factor across Europe, the U.S.

and elsewhere with the growing understanding that hydrocarbons are not easily displaced by alternatives for much of the world’s energy needs.

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 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 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.

Debt exchanges —In the year ended December 31, 2025, we entered into separate, individually negotiated agreements (as amended, the “Exchange Agreements”) with certain holders of the 4.00% senior guaranteed exchangeable bonds due December 2025 (the “4.00% Exchangeable Bonds”).

In the year ended December 31, 2025, the holders exchanged $196 million aggregate principal amount of 4.00% Exchangeable Bonds under the terms of the Exchange Agreements and received an aggregate 73.3 million Transocean Ltd.

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

Debt tender offers —In October 2025, we made an aggregate cash payment of $100 million, including related costs, to complete cash tender offers for $89 million aggregate principal amount of the validly tendered 7.35% senior notes due December 2041 (the “7.35% Senior Notes”) and $16 million aggregate principal amount of the validly tendered 7.00% notes due June 2028.

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

Debt repurchases —In the year ended December 31, 2025, we made an aggregate cash payment of $36 million, including related costs, to complete open market repurchases of $36 million aggregate principal amount of the 7.00% notes due June 2028 and $1 million aggregate principal amount of the 7.35% Senior Notes.

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

Drilling market —Our industry outlook remains positive, informed by numerous long-term forecasts indicating that hydrocarbons will continue to be a critical source of energy for the foreseeable future.

In response to persistent geopolitical instability, supply chain constraints, and the limitations of renewable energy technologies, many governments and operators are reassessing their energy strategies.

Rather than accelerating a shift away from fossil fuels, many policy makers are prioritizing energy security, resulting in a diverse and resilient supply portfolio.

This shift underscores the continued need for accessible, reliable, cost-effective, and transportable energy sources, with offshore oil and gas increasingly viewed as a strategic asset.

We believe these dynamics will support sustained, long-term demand for oil and natural gas.

In the context of the natural depletion of existing fields, maintaining current oil and natural gas production levels will require both the development of existing resources and continued investment in exploration to identify new reserve opportunities.

We believe that oil and natural gas producers will invest a greater portion of their budgets in offshore drilling, and particularly in deepwater, where resource potential, production longevity, and project economics are favorable, to achieve their production and reserve replacement targets.

Although hydrocarbon prices remain sensitive to geopolitical events, macroeconomic policy decisions, and short-term supply fluctuations, we expect the overall economics of deepwater projects to remain attractive.

Deepwater and harsh-environment fields continue

to generate competitive economic returns and are of generally lower carbon intensity compared to many other hydrocarbon sources, making them consistently compelling for capital deployment.

While the long-term outlook for offshore drilling activity remains positive across all major deepwater sectors, we expect our customers to continue to be disciplined in capital spending.

Consistent with our prior expectations, tendering activity and contract awards increased during the latter part of 2025.

Additional contracting opportunities are anticipated through the first half of 2026 for projects commencing in 2027 and 2028.

In the near term, continued pressure on utilization may result in the retirement of uncompetitive rigs.

We expect demand for harsh-environment rigs to remain strong through the end of the decade, driven primarily by activity in Norway—the largest market for such units—and by emerging opportunities in new geographies suited for harsh-environment capable rigs.

Several high-specification semisubmersible rigs that previously mobilized to other harsh-environment markets such as Namibia, the Black Sea, and Australia may ultimately return to the region depending on project requirements and market conditions.

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 distinguishes us 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 material to our contract drilling revenues.

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.

Contract backlog —We believe our contract backlog provides an indicator 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, including certain performance-based provisions for which achievement is probable, excluding provisions for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are not expected to be material to our contract drilling revenues.

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

The contract backlog for our fleet was as follows:

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

The average contractual dayrate relative to our contract backlog is defined as the average maximum contractual operating dayrate to be earned per operating day in the measurement period.

The average contractual dayrate relative to our contract backlog is defined as the average maximum contractual operating dayrate to be earned per operating day and certain performance-based provisions expected to be achieved in the measurement period.

An operating day is defined as a day for which a rig is contracted to earn a dayrate during the firm contract period after operations commence.

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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 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.

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, waiting-on-customer rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances.

The contractual operating dayrate may also be higher than the actual dayrate we ultimately receive because of a number of factors, including rig downtime or suspension of operations.

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Total fleet average revenue efficiency

Our revenue efficiency rate varies due to revenues earned under alternative contractual dayrates, such as a waiting-on-weather rate, repair rate, standby rate, force majeure rate or zero rate, that may apply under certain circumstances.

Our revenue efficiency rate varies due to revenues earned under alternative contractual dayrates, such as a waiting-on-weather rate, waiting-on-customer rate, repair rate, standby rate, force majeure rate or zero rate, that may apply under certain circumstances.

Our revenue efficiency rate is also affected by incentive performance bonuses or penalties.

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Loss on impairment of assets

Loss on disposal of assets, net

Gain (loss) on disposal of assets, net

Operating loss

1 unchanged sentence

Interest income

Interest expense, net of amounts capitalized

Gain (loss) on retirement of debt

Loss before income tax (expense) benefit

Income tax (expense) benefit

Interest expense

Gain on retirement of debt

Loss before income taxes

Income tax benefit

“nm” means not meaningful.

Contract drilling revenues —Contract drilling revenues increased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:

(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 $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.

(a) approximately $140 million resulting from higher average daily revenues, (b) approximately $110 million resulting from increased utilization, (c) approximately $80 million resulting from increased revenue efficiency for the fleet, (d) approximately $70 million resulting from increased activity for the operations of our newbuild ultra-deepwater drillship Deepwater Aquila and (e) approximately $50 million resulting from increased reimbursement revenues.

These increases were partially offset by approximately $10 million resulting from one less calendar day in the year ended December 31, 2025.

Costs and expenses —Operating and maintenance costs and expenses increased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:

(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.

(a) approximately $85 million resulting from increased activity for the operations of our active fleet, (b) approximately $50 million resulting from increased reimbursable costs, (c) a net increased loss of approximately $45 million associated with certain legal outcomes that resulted in a net non-cash loss of $20 million in the current year compared to a net gain of $25 million from favorable settlements in the earlier year, (d) approximately $35 million resulting from the operations of our newbuild Deepwater Aquila and (e) approximately $35 million resulting from the estimated effect of inflation on personnel and other operating costs.

These increases were partially offset by the following:

(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) $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) 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 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.

(a) approximately $25 million resulting from rigs classified as held for sale or sold, (b) approximately $15 million resulting from lower supply chain costs and (c) approximately $5 million resulting from costs associated with the early retirement of certain personnel in the earlier year.

Depreciation and amortization expense decreased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:

(a) $97 million resulting from rigs sold or classified as held for sale and (b) $9 million resulting from assets that were retired or had reached the end of their useful lives, partially offset by (c) $27 million resulting from one acquired harsh environment semisubmersible, one newbuild ultra-deepwater drillship and other property and equipment placed into service in the earlier year.

General and administrative costs and expenses decreased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:

(a) $8 million resulting from decreased legal and professional fees, (b) $5 million resulting from decreased personnel costs, primarily associated with the early retirement of certain personnel in the earlier year, and (c) approximately $4 million resulting from decreased technology costs.

Impairment of assets —In the year ended December 31, 2025, we recognized a loss associated with the impairment of the ultra-deepwater floaters Deepwater Champion , Discoverer Americas, Discoverer Clear Leader , Discoverer India , Discoverer Luanda , GSF Development Driller I and the harsh environment semisubmersible Henry Goodrich together with related assets, which we determined were impaired at the time we classified them as held for sale, and Development Driller III and Discoverer Inspiration together with related

assets, which were previously classified as held for sale and we determined were further impaired.

In the year ended December 31, 2024, we recognized a loss associated with the impairment of the ultra-deepwater floaters Deepwater Nautilus , Development Driller III and Discoverer Inspiration , together with related assets, which we determined were impaired at the time we classified them as held for sale.

Disposal of assets —In the year ended December 31, 2025, we recognized a net gain of $4 million associated with the disposal of rigs and related assets.

In the years ended December 31, 2025 and 2024, we recognized a net gain of $3 million and a net loss of $16 million, respectively, associated with the disposal of assets unrelated to rig sales.

Other income and expense —Interest expense increased in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:

(a) $204 million increased interest resulting from a decreased gain on 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% Exchangeable Bonds”), (b) $55 million increased interest resulting from debt issued in the earlier year and (c) $15 million increased interest resulting from interest costs capitalized for our newbuild construction program completed in the earlier year, partially offset by (d) $79 million decreased interest resulting from debt repaid as scheduled or early retired.

In the year ended December 31, 2025, we recognized a net gain on retirement of debt due to the following:

(a) a net gain of $4 million associated with the retirement of $105 million aggregate principal amount of notes validly tendered in the tender offers completed in the year, partially offset by (b) a net loss of $1 million associated with the redemption of $940 million aggregate principal amount of our debt securities.

In the year ended December 31, 2024, we recognized a net gain on retirement of debt due to the following:

(a) a net gain of $144 million associated with the retirement of $845 million aggregate principal amount of notes validly tendered in the tender offers completed in the year and (b) a net gain of $17 million associated with the redemption of $852 million aggregate principal amount of our debt securities.

Other expense net, increased in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following:

(a) a loss of $99 million associated with, pursuant to the Exchange Agreements, the issuance of additional Transocean Ltd.

shares to certain holders of 4.00% Exchangeable Bonds in the current year, (b) a net increased loss of $29 million associated with currency exchange rate changes and (c) decreased income of $22 million associated with non-service components of net periodic benefit income.

Income tax expense —In the years ended December 31, 2025 and 2024, our effective tax rate was 1.1 percent and 2.2 percent, respectively, based on loss before income tax benefit.

In the years ended December 31, 2025 and 2024, the effect of various discrete period tax items was a net tax benefit of $193 million and $158 million, respectively.

In the year ended December 31, 2025, such discrete items included changes to various uncertain tax positions, valuation allowances, rig ownership changes and rig basis changes related to impairments.

In the year ended December 31, 2024, such 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 years ended December 31, 2025 and 2024, our effective tax rate, excluding discrete items, was 81.2 percent and 159.1 percent, respectively, based on income or loss before income tax expense.

In the year ended December 31, 2025 compared to the year ended December 31, 2024, 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.

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.

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

In the year ended December 31, 2025, our primary sources of cash were net cash provided by our operating activities, net cash proceeds from the issuance of shares and net cash proceeds from the issuance of debt.

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

Net cash provided by operating activities increased primarily due to (a) increased cash received from customers and (b) decreased cash paid to suppliers, partially offset by (c) increased cash paid for personnel-related costs.

Years ended December 31,

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Capital expenditures

Investments in debt and equity of unconsolidated affiliates

Investment in loan to 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 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.

Proceeds from disposal of equity investment in unconsolidated affiliate

Cash acquired in acquisition of unconsolidated affiliates

Net cash used in investing activities decreased primarily due to (a) decreased capital expenditures, resulting principally from the completion of our newbuild construction program in the earlier year, partially offset by (b) decreased proceeds from disposal of assets.

Years ended December 31,

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Proceeds from issuance of debt, net of issue costs

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.

Proceeds from issuance of shares, net of issue costs

Net cash used in financing activities increased primarily due to (a) decreased net cash proceeds from the issuance of $500 million aggregate principal amount of 7.875% Senior Guaranteed Notes in the current year compared to the issuance of $900 million aggregate principal amount of 8.25% senior notes due May 2029 and $900 million aggregate principal amount of 8.50% senior secured notes due May 2031 in the earlier year, partially offset by (b) decreased cash used to repay debt, resulting principally from the early retirement of $1.05 billion aggregate principal amount of certain debt securities in redemptions, tender offers and repurchases in the current year compared to the early retirement of $1.70 billion aggregate principal amount of certain of our debt securities in redemptions and tender offers completed in the earlier year, and (c) net cash proceeds from the issuance of shares with no comparable activity in the earlier 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, 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.

Overview —We expect to use existing unrestricted cash balances, cash flows from operating activities, borrowings under our Secured Credit Facility, proceeds from the 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 and installments or other debt-related deposits or reservations of unrestricted cash.

At December 31, 2025, we had $620 million in unrestricted cash and cash equivalents and $377 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.

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.

We have a Secured Credit Facility that provides us with a borrowing capacity of $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 drillships and two of our harsh environment semisubmersibles, 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 .

For more information about our Secured Credit Facility and our outstanding debt instruments, 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 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.

Our secured indentures include collateral rig leverage ratios.

During periods where collateral rigs have experienced reduced levels of operating efficiency or utilization, we have in the past deposited cash into the applicable debt service reserve account and taken other actions, including obtaining consents of holders of certain of our secured debt, as applicable, in order to satisfy the applicable collateral rig leverage ratio, and we may in the future take such actions from time to time, as necessary.

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, 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.

Debt and equity markets —From time to time, we seek to access the capital markets in connection with our ongoing efforts to prudently manage our capital structure and improve our liquidity position.

For example, we have completed multiple debt and equity

transactions, including tender offers, redemptions, exchanges and retirement of existing debt.

Subject to then-existing market conditions and our expected liquidity needs, among other factors, we may also use existing unrestricted cash balances, cash flows from operating activities, or proceeds from asset sales to manage our capital structure, including by purchasing or exchanging any of our debt or equity 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 debt and equity transactions during the three-year period ended December 31, 2024, see Notes to Consolidated Financial Statements— Note 8—Debt .

For more information about our debt and equity transactions during the three-year period ended December 31, 2025, see Notes to Consolidated Financial Statements— Note 8—Debt and Notes to Consolidated Financial Statements— Note 13—Equity .

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.

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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 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.

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

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.

During the year ended December 31, 2025, we completed the disposal of six ultra-deepwater floaters, together with related assets, in sales for recycling.

As of December 31, 2025, we had classified as held for sale two ultra-deepwater drillships and one harsh environment semisubmersible, together with related assets, and we have committed to sell these drilling units for recycling.

In January 2026, we completed the sale of one ultra-deepwater drillship, together with related assets, previously classified as held for sale.

Considering market conditions, we may identify additional 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 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.

Other commercial commitments —We have other commercial commitments, such as standby letters of credit and surety bonds that guarantee certain performance activities, tax commitments and customs or other obligations in various jurisdictions.

The cash obligations of these commitments, which are primarily geographically concentrated in Brazil, are not normally called because we typically comply with the underlying performance requirements.

Standby letters of credit are issued under various committed and uncommitted credit lines, some of which require cash collateral.

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

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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.

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 returns are undergoing examinations in several taxing jurisdictions covering various years.

We review our assets and liabilities on an ongoing basis and, to the extent audits or other events cause us to adjust our previously recognized assets or liabilities, we record those adjustments in the period of the event.

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;

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and the potential for changes in the taxes paid to one country that either produce, or fail to produce, offsetting tax changes in other countries.

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 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.

Income tax exposure items primarily include potential challenges to permanent establishment or active trading 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.

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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.

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, 2025 and 2024, 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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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.

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 profitable and temporarily 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.

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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.

We also consider a held-for-sale asset to be impaired to the extent its carrying amount exceeds its estimated fair value less cost to sell.

In the years ended December 31, 2025, 2024, and 2023, we recognized a loss of $3.05 billion, $772 million, and $57 million, respectively, associated with the impairment of assets that we determined were impaired at the time we classified such assets as held for sale or we identified changes in circumstances that indicated assets previously classified as held for sale were further impaired.

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

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We occasionally receive inquiries from governmental regulatory agencies regarding our operations around the world, including inquiries with respect to various tax, environmental, regulatory and compliance matters.

To the extent appropriate under the circumstances, we investigate such matters, respond to such inquiries and cooperate with the regulatory agencies.

To the extent appropriate under the circumstances,

we investigate such matters, respond to such inquiries and cooperate with the regulatory agencies.

See Notes to Consolidated Financial Statements— Note 12—Commitments and Contingencies .

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What changed 10-K

Item 7. Management’s Discussion and Analysis