Please standby, we are about to begin. Good day, everyone. And welcome to the Transocean Q4 2013 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Thad Vayda. Please go ahead, sir.

Thank you, Bennett. Good day to everyone. And welcome to Transocean’s fourth quarter and year end 2013 earnings conference call. A copy of the press release covering our financial results, along with supporting statements and schedules, are posted on the company’s website at www.deepwater.com. We’ve also posted some supplemental materials that you may find helpful as you update your financial models. These materials can be found on the company’s website by selecting Financial Reports under the Investor Relations tab. Joining me this morning are Steven Newman, Chief Executive Officer; Esa Ikaheimonen, Executive Vice President and Chief Financial Officer; and Terry Bonno, Senior Vice President of Marketing. Before I turn our call over to Steven, I would like to point out that during the course of this call participants may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts. Among others, these include future financial performance, operating results, estimated contingencies associated with the Macondo well incident, anticipated results of our cost savings initiatives, strategic projects and corporate financing activities, capital allocation and strategy, newbuild project and the prospects for the contract drilling business generally. Such statements are based on the current expectations and certain assumptions of management and are therefore subject to certain risks and uncertainties. As you know, it’s inherently difficult to make projections or other forward-looking statements in a cyclical industry, since the risks, assumptions and uncertainties involved in these forward-looking statements include the level of crude oil and natural gas prices, rig demand and the effects and results of litigation, assessments and contingencies, and operational and other risks, which are described in the company’s most recent Form 10-K and other filings with the U.S. Securities and Exchange Commission. Should one or more of these risks and uncertainties materialize, or underlying assumptions prove incorrect, actual results may vary materially from those indicated. Transocean neither intends to nor assumes any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated. Also note that we may use various numerical measures on the call today that are or may be considered non-GAAP financial measures under Regulation G. You will find the required supplemental financial disclosure for these materials -- for these measures, including the most directly comparable GAAP measure and an associated reconciliation, on our website at deepwater.com under Investor Relations, Financial Reports and Non-GAAP Financial Measures. Finally, to give more folks an opportunity to participate in this call, please limit your questions to one initial question and one follow-up. Thanks very much for corporation in this regard. I’ll now held the -- hand the call over to Steven Newman. Steven?

Thanks, Thad. And welcome to all of our employees, customers, investors and analysts. Thank you for joining us on the call today. Before I comment on the quarter’s results I would like to review some highlights from 2013. We started the year on a positive note by reaching agreement with the Department of Justice to resolve certain claims against the company related to the Macondo well incident. This agreement removed some of the uncertainty associated with this complex and ongoing litigation. Additionally, later in the year, we settled the two civil cases associated with the project field incident in Brazil. As a reminder, the company assumed no financial obligation in this settlement and did not accept any fault or liability. We initiated a dividend of $2.24 per share, which was approved by our shareholders at the 2013 Annual General Meeting and represents one of the industry's largest yields and highest implied payout ratios. We are committed to a sustainable and growing distribution of capital and as you know, recently announced that our Board will recommend that our shareholders approve a $3 per share dividend at the 2014 Annual General Meeting. During 2013 we added approximately $7.9 billion in backlog, including the five-year contract with Chevron for the Deepwater Conqueror to be delivered in the second quarter of 2016, as well as four and five-year contract renewals with the same customer on two existing ultra-deepwater drillships. This backlog highlights the strength of our marketing team and the deep customer relationships, which they have nurtured over the years. Our current backlog of approximately $27 million includes seven newbuild ultra-deepwater drillships. As part of our fleet renewal we announced shipyard contracts valued at approximately $1.2 billion to construct five Super B 400 Bigfoot Class jackup rigs with options for five additional rigs. We…

Thank you, Steven and good morning, good afternoon, everyone. I will discuss the key elements of our fourth quarter results and then update our 2014 full year guidance. As Steven mentioned, we reported net income attributable to controlling interest of $233 million, or $0.64 per diluted share for the fourth quarter of 2013. These results included $34 million or $0.09 per share in net unfavorable items already detailed in our press release. Excluding these items, our adjusted earnings from continuing operations were $267 million, or $0.73 per diluted share. This compares with similarly adjusted earnings of $1.37 per diluted share in the third quarter of 2013. For the fourth quarter, our consolidated revenues from continuing operations decreased from the prior quarter by $226 million to $2.33 billion. Contract drilling revenues decreased by $200 million. This decrease was due to two main factors. Number one was a decline in fleet utilization from 83% to 75% primarily as a result of an expected increase in planned shipyards as well as idle and stacked rigs. The increase in out-of-service time was in line with our prior quarter’s guidance and was reflected in our fleet status reports and updates. Number two was a -- was a decrease in revenue efficiency to 91.7% from 94%. This decline was mainly due to well control equipment downtime on certain ultra-deepwater rigs as Steven already mentioned. These unfavorable variances were probably offset by higher average dayrates and the commencement of operations of high-specification jackup Transocean out buy. Other revenues decreased about $26 million due to a decrease in our low margin Drilling Management Services business. Lastly, consistent with our expectations and below our guidance range, fourth quarter operating and maintenance expenses were $1.53 billion, compared with $1.49 billion in the third quarter of 2013, an increase of $41…

Thanks, Esa, and good morning to everyone. Before we cover specific markets, I would like to make a few general comments. In 2013, we generated $7.9 billion of contract backlog, including securing contracts for one existing newbuild, the deepwater Asgard, the additional Chevron newbuild drillship, the Deepwater Conqueror in a direct negotiation and the continuing growth of our relationship with Shell, with a long-term contract on the Polar Pioneer. Tendering for the first half of 2013 was generally stable and the market provided numerous opportunities to take advantage of high market rates across all classes of rigs. The second half of 2013 was characterized by delays in awards due to regulatory issues, a slowdown in tendering activities across the floater market and customers delaying exploration programs to the end of ’14 and into 2015. Recently, the outlook for 2014 has been variously described as clouded, muted, stagnant, spending slowdown, or entering a cyclical pause. As many of you are aware, we have been discussing the gradually deteriorating market trends for the last nine months or so. And unfortunately, the market is behaving as we predicted. I currently think that this pause looks similar to that observed in 2002 to 2004, a period characterized by the initial decrease in demand with the markets remaining stagnant over a period of 18 to 24 months, weak deepwater and midwater markets as we’re already seeing, customers delaying programs and an increase in sublet activity. While these characteristics are certainly similar to the market we see today, we expect year-on-year demand to continue to grow assuming as we and our customers do that commodity pricing remains healthy. The prompt oversupply is allowing our customers to high grade their fleet, and absent an urgency to contract refocus on capital allocation. While there is little question that…

Thank you. Bennett, we’re now ready to open up the line for Q&A.

(Operator Instructions) We’ll take your first question from Angeline Sedita from UBS.

Thanks. Good morning.

Hi, Angie.

Hello. Terry, you’re right on the money on talking about oversupply nine months ago. And as you mentioned here, we’re seeing a cyclical pause in contracting and tendering. What gives you the confidence or what are you seeing in the marketplace that gives you the confidence that you believe that it will recover or start to improve in 2015?

Well, in conversation with our customers, Angie, they fully expect to get back to more drilling and they’re going to have to do more development drilling. So as we look over the next couple of years, we can see the progress that they’re focused on. So that mean that gives us confidence they got to replace their reserves, they got to increase production. I think that you also heard Petrobras with their discussion about their forward business plans they got to do the same thing. And that gives us the confidence in the customer discussions. And then, we also believe that there’s going to be some -- hopefully some near-term opportunity with Petrobras, again bridging to the Sete rigs and I think they’re going to take the prices maybe a little bit and take a couple more rigs.

And then as a follow-up to that, is there at least of the near-term more risk to utilization and you do have quite a bit of your fleet up for renewal in 2014, I believe 42% of your fleet, of which most is ultra-deepwater and deepwater. If you look at your fleet, where do you think the risk is or is the extended periods of idle time or even but potentially a warm stacking or cold stacking?

Angie, we do fully appreciate the near-term softness and the fact that we’ve got a lion’s share of the availability. I mean, if you look at certainly the ultra-deepwater space alone, we've got 12 of the 38 that are out there available. So we're focused on all the opportunities that are out there. We’re going to be fighting for work. Again, the issue as Steven said earlier is that we can’t create demand. And so again, we are concerned but like I said we’re going to do everything we can to get these rigs play. We are in conversation on a couple of the rig that are certainly coming available here for prompt availability, so we like those conversation. We can’t talk a whole lot about them because we’re all listening to each other's earnings call and trying to figure out where the positioning is with our competitors. So I’ll just say that we are optimistic on a couple of the rigs. We have had a bit of, I hate to say luck because I not believe in luck. We’ve had some stumbles here recently. We've been in negotiation on the first four rigs available. We had LOIs on all four of the rigs, which would be to the energy, the DD1, the DD2 and the delays occurred, approvals not received from certainly some the opportunities in West Africa. And then most recently with one of the integrated oils here in the Gulf, we had a contract negotiated on the DD1 and when it was went to approval, it was -- everybody was surprised and informed that they were not going to drill for ’14. So this is the kind of thing that we are going to see in this market. But we've been through this before, I got a fantastic season marketing team that had been through every downturn since the ’80, so we got the right -- I think we got the right strategy. We focused on the right programs and again, hope to announce some positive news shortly.

We’ll hear next from Ian Macpherson from Simmons.

Hi. Thanks. Terry.

Hi Ian.

Hi, Steven. The DD1 and DD2 as of your January report were up in February. Given, I can’t ask you about every rig so in this year, but those two given the timing. Can you provide any more specifics with regard to when those rigs have rolled or when they are rolling and what the immediate prospects are?

Well, we have -- we actually are discussions on both of them. We have them in live tenders as we speak. So we’re just waiting for the tenders to be announced and reviewed, so we -- like I said we’re in play there. I can't really give you specifics of the actual opportunities because we’re in direct discussion and we obviously don't want to tip anybody’s hand there. So all I can say is that we’re actively putting these rigs forward.

Okay. One more fleet question. ODS reported that you bid the KG1 to Petrobras at 440. Everyone’s been talking about that. One of your competitors talked about on their conference call. You haven’t addressed it. You probably don't want to, but will you anyway?

Well, your right, Ian, I can’t talk about the specifics because the tenders not over, there is a 45-day validity to any tender that we place in Brazil. I'll talk about the process briefly and the process is that when Petrobras -- there is a waterdepth capability. Petrobras like to classify, they are tendering opportunity based on waterdepth. So what they’re trying to do is, it’s a 2,400 meter tender and they’re trying to understand where the levels of the market are. We like the opportunity and also we think, maybe they take a couple of rigs in this opportunity. And certainly, we would be excited about that. But look at where we are. We got -- we’ve got 12 rigs that we’ve got to play. And this is a nice long-term program and then it's something that we’re certainly interested in and again, we’ll just have to wait and see how it plays out.

Okay.

But one thing that you should remember and I don't think that it get discussed very much, but in this tendering process, we’ve been a single activity rig, you get a 6% penalty for a single activity rig. So let just and that’s about all we can really say about it.

Okay. I will pass it over. Thanks, Terry.

(Operator Instructions) We move next to Greg Lewis from Credit Suisse.

Yes. Thank you and good morning.

Good morning.

I just have a couple of questions. Terry, just a follow-up on that the Brazil tender. The one rig was bid on a tender. Is that part of a rig package or if that rig were to get win a tender within there be even a re-bidding from other contracts? Is that the way to think about or is this one rig going in and you could just sort of a tie in other rigs on that?

I’m sorry, I didn't really fully understand the question. Can you repeat it for me, also a little hard to hear you?

Yeah. I guess. Okay. Sorry. I apologize for that. Terry Bonno That’s okay.

So I guess with the Brazil tender, you mentioned that it was part of -- is that part of a bigger rig package or just more just an initial tender where then there will be other potential tenders to follow-up.

This is just when Petrobras put out their rig tendering. They put out the request for one or more so they got to choose how many rigs that they take.

Okay. And then just shifting over to the newbuild, I guess this question is more for Steven or Esa. As we think about those rigs, the newbuilds. I guess, the first one schedule to deliver in mid 2017. Is the right way to think about it going-forward, as Transocean continues to renew and upgrade its fleet that is sort of the new window where we should expect newbuilds to come in line? I guess what I’m asking is, is there the potential for Transocean to go back to the yards and get deliveries for either late ’16 or early ’17 at this point or is that window sort of closed?

Well, the construction process for rig, Greg, provided you go to an existing yard with well-developed design, it's 36 to 38 months for delivery between the time you signed the contract and time you take delivery of the rig, if you include everything that goes into constructing the rig and commissioning the equipment and preparing it to go to work. So, I think, the announcement that we issued last night that indicated we’ve signed contracts with deliveries about 38, the first delivery about 38 months from now is, I think about what you would expect if you go to yard.

Okay. And then just really following up on that, I mean, clearly refinancing term sound very favorable with 95% on delivery. Is that what other -- and that was in Singapore and that was Jurong. Is that -- are the Korean yards offering similar type terms to that or is that more specific to that yard in that contract?

This was a competitive tender exercise with Korean and Singapore in yards. And in addition to the design of the ship and the cost of the ship we incorporated into our evaluation the payment terms that we're on offer and certainly in the context of the arrangement with Jurong in Singapore, we found that payment terms that Jurong offered to be very attractive.

Okay. Thank you very much.

We'll move next to Jacob Ng from Morgan Stanley.

Good morning and thanks for taking my question. Just wondering if you could provide some more color on your rationale for going ahead with the drillship models at Jurong versus one of the most established Korean yards and would you be able to help us with the construction risks as you released this prototype rig design?

Yeah, so when we went through this exercise Jacob as I indicated with -- we included the Korean yards and the Singaporean yards and we reflected into our valuation, the specifications of the ship and the cost of the ship and the payment terms and in our evaluation we reflected in there the fact that this would be only the -- I guess the second or third ship that Jurong are constructing. So they have an Espadon I design under construction right now and our team visited the yard and reviewed that design with Jurong and toward the facility and got comfortable that transition from the Espadon I design to the Espadon III design is not a huge leap for Jurong. And we've got comfortable that Jurong could deliver the ship within the context of the proposal they had made to us. So we were comfortable with the overall offer that Jurong made.

Great, thanks. And this one is for you, Esa. I want to dig a little bit deeper with your O&M guidance. I was wondering the lower end of your guidance range might be baking in the assumption that additional rigs get stacked on top of the once that if already chosen to stack?

You're right. And that's why there is a range because the activity level is a little bit difficult to predict and market conditions determine that to some extend. So you take your best estimates and you provide a range around it, that's kind of the way it works. So there is an element of potential movement regarding what happens to several rigs that might be candidates for stacking or might actually end up being idle during the year. So you're right, that's kind of the way it works and it's very difficult to give you a very specific number because of that very reason. What you know is of course your ability to reduce cost both on the show based side of things as well as offshore. You know what is already divested or held for sale and you do know what the new build impact is. And then the uncertainty has to do with some of the other rigs that either are stacked or may become stack during the period.

Got it, okay, thank you. I'll turn it over.

And we move next to Judd Bailey from ISI Group.

Thank you, good morning.

Good morning.

A question first I guess for Terry. Terry you mentioned in your comments that you think the current time period seems similar to what we saw from 2002 to 2004. My recollection is we kind of had a slow bleed in day rates over a extended period of time, during that time frame. Would you see -- if we don't see demand start to pickup again for another 12 to 18 months do you think a similar scenario could unfold and if not why wouldn't -- how could rate stable if demand has not start to pickup?

I mean we are in a supply demand business. So obviously as demand doesn’t come up, it's going to pressure the right down. I don't know if the behavior of the rates are going to mimic. I just think that initially when you looked at the different downturns that one to me seem to look the most the similar, but I would also say that it also provided the highest increase in rates once you got beyond the downturn. I mean rights went up from I believe at the time it was 200,000 to 400,000 a day. And I remember a quite vividly it was such a quick ramp up and as we look out beyond 2016 and delivery that with the newbuild. And in ‘17, we like the way that the market look to that particular time and it's all about timing in this market Judd as you know. And we're just going to have -- we're going to fight through it. We're going to do the best we can. So let's see how it plays out.

Got it, okay, understood. And I just also want to make sure I'm on the same page. When you discuss high-spec rates, ultra-deepwater rates between that 500 and 550 and then I believe you said lower spec between 450 and 500. You have various degrees of specification in your fleet. Would that be accurate in assuming that the KG1 would be in high-spec category?

Well the KG1 is a single-activity rig and it’s similar to, I mean it's Samsung design and it's not on the same design as the rest of our fleet. And we also, we are little concerned about what's going on with pricing in India. So we felt like this would be a good opportunity, the gas pricing in India could be a good opportunity to relocate the rig and so that’s how we looked at the decision to do what we did.

Got it, okay. I'll turn it back. Thank you.

Thank you.

(Operator Instructions) We'll move next to Darren Gacicia from Guggenheim Securities.

Hey thank you very much. So one of the question I guess I wanted to ask is that we’re obviously starting to add some rigs as part of the fleet renewal process. Do we have any parameters around maybe rigs that, the number of rigs are mainly to be stacked or maybe some extended commentary on assets that maybe for sale or I know you mentioned the midwater floaters kind of being possibly -- possibly being attractive for selling as a package from the North Sea. But how do we equate that, how do we kind of look at the net fleet maybe two years from now in terms of what you think still kind of remains and maybe what sort of on the sidelines because it seems like the definition of cold stack for the industry maybe changing?

That’s an excellent question, Darren. I guess I would point you to our commentary at the Analyst Day and then what I reiterated today. We've set ourselves sort of a five-year timeframe over which we expect to transform the fleet. And we've given indications about what that long-term fleet looks like, 50% ultra-deepwater, 40% high-spec jackups and 10% harsh environment. We've been purposefully silent on absolute rig numbers because I'm not sure how important that is. As long as the fleet migrates towards that kind of an allocation, we think we will be appropriately positioned to compete effectively across the asset classes that we're competitive in and regardless of what kind of a cycle we are in.

Just kind of drawing from Terry’s comment so, that if the KG1s kind of a single activity and as you know it’s probably technically an ultra-deepwater rig, is there any kind of -- there are candidates without giving a number of specificity, there are candidates in the ultra-deepwater listing than maybe actually kind of on the divesture list? And maybe part two, if you think about kind of what’s in the -- kind of ultra-deepwater, deepwater portfolio, in terms of what you may want to keep, is there a sort of any parameter to know what maybe need to be spent to upgrade some of these rigs, maybe to put them in a class of the type of rig you would like to keep?

Yeah, all really good question, Darren and they speak to the heart of the strategic conversations we have on an ongoing basis. So this is an example of kind of discussions we have. If you look at our fleet status report and the assets that we characterized today as high-spec floaters, within that -- even within that category, there are degrees of high-spec. We've got some rigs that are rather more limited in water depth capability and we've got one or two of those rigs that only carried a 10k stack. And so that's a very different asset then something like to discover a clear leader that came out full dual activity, capable of drilling in 12,000 foot water depths, really state-of-the-art vessel and you step forward to the vessels that are under construction today with 20k capability. And so even within our high-spec asset category, there are rigs that we would characterize as divestiture candidates. I don't want to be too public about which those rigs are because my expectation for Terry, his marketing team and for John Stobart’s operations team is that those teams continue to do there absolute best to keep the rigs working. And they do their absolute level best to keep the rigs in the best possible condition, and providing the best possible service to our customers. And if somebody comes along and makes us an offer that we think matches our valuation expectations than the asset becomes a divestiture rather than a component of Transocean's operating fleet. It's a nature of the strategic challenge we face with respect to the ongoing transformation of our fleet.

If I could sneak kind of a corollary to that end, would you say that the preference on kind of incremental capital employment would be towards new construction, or are you open minded to maybe some of the upgrades that would work on some of the other rigs as well as the way to deploy kind of what I would consider kind of sustaining capital if you will?

I think we're probably at a starting point anyway. We're probably indifferent with respect to building versus buying. The question of upgrading and existing rig is a little bit of a different piece. You've got -- when you think about undertaking something like that, you've got to factor into the economic evaluation, the opportunity cost of taking the rig out of service while you undergo the upgrade. And so it's a bit of higher hurdle to overcome with respect to doing something like that, that’s not out of the question. We've done it in the past. But I would say, our starting our point is, we either want to build what we design or we buy something that’s somebody else has build that meets our asset, our long-term asset strategy.

At this time, we'd like to move to our follow-up from Ian MacPherson from Simmons.

Thanks for taking the follow-up. Esa, I had a CapEx question. You mentioned that you under spend your CapEx guidance last year, partly because of the newbuild phasing. But it seem like, it was bigger than that almost half a billion less in your guidance. Did you have any sort of organic savings? And then, secondly, you said that your spares CapEx should decline after '14. What about the sustaining CapEx? With the fleet getting smaller and more moderating, does that sustaining CapEx shrink in the out years as well?

Okay, let me take the first one first. So your observation is correct. The 2013 CapEx was more significantly below the guidance, so it's not all explained by the Asgard re-phasing. There is other elements associated to it, one of them being for instance, the shipyard expenditure capitalization and the other one being the spares for CapEx. So there is another re-phasing area, are actually some of the expenditure that was supposed to be incurred in 2013 and actually will be incurred in 2014 and that's captured by the existing guidance. So it’s a little bit more of a mixed bag treatment than what I said, but the prime reason has to do with the Asgard re-phasing

Okay. Sustaining CapEx going forward.

Yeah. Sustaining CapEx going forward, it's going to part of the fleet renewal strategy to reduce that element. So younger the fleet, the lower the sustaining CapEx component going forward and the other element that should have an impact is the ongoing emphasis on shipyard execution and the targeted improvements on that side of the business. So our expectation is that it will get lower, but it only gets significantly lower as a result of the fleet high-grading exercise.

Okay. And then finally the Polar Pioneer was scheduled to finished with Statoil and commence, I guess getting ready to go over to Alaska. We know from Shell that’s not happening this year. How do we assess that backlog risk at least for '14, if not for the full term of that contract at this point?

Hi, Ian. This is Terry. We're scheduled to conclude our contract with Statoil, I think somewhere in like March, early April than we will be mobilizing -- we will be mobilizing over to Singapore to get the rate and we do see some upgrade on the rigs and that's what we know today.

Okay. Thanks.

Thank you.

And that does end our question-and-answer session. Mr. Vayda, I would like to turn the conference back over to you for any concluding remarks.

Thank you to everyone for your participation today. We'll be available this afternoon, if you have any questions or additional comments. Thank you very much. We'll take to you when we report first quarter 2014 results. Have a good day.

And that does conclude today's teleconference. We thank you all for your participation.