Please standby. Good day and welcome to the Transocean Limited First Quarter 2017 Earnings Conference Call. Today’s call is being recorded. And at this time, I would like to turn the conference over to Brad Alexander. Please go ahead, sir.

Thank you, Yolanda. Good morning, and welcome to Transocean’s first quarter 2017 earnings conference call. A copy of the press release covering our financial results, along with supporting statements and schedules including reconciliations and disclosures regarding non-GAAP financial measures are posted on the company’s website at deepwater.com. Joining me on this morning’s call are Jeremy Thigpen, President and Chief Executive Officer; Mark Mey, Executive Vice President and Chief Financial Officer; and Terry Bonno, Senior Vice President, Industry and Community Relations. 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. Such statements are based upon the current expectations and certain assumptions of management and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for more information regarding our forward-looking statements, including the risks and uncertainties that could impact our future results. Also, please note that the company undertakes no duty to update or revise forward-looking statements. Finally, when we enter the question-and-answer portion of the call to give more participants an opportunity to speak on this call, please limit your questions to one initial question and one follow-up question. Thank you very much. And now, I’ll turn the call over to Jeremy.

Thank you, Brad, and a warm welcome to our employees, customers, investors, and analysts participating in today’s call. First and foremost, I’d like to recognize and thank the entire transition team for achieving an impressive and important milestone in the company’s long and distinguished history. In late March, Transocean eclipsed one full-year of operation without a single lost-time incident. While we’re certainly proud of this extraordinary achievement, we know that we must remain vigilant as we continue our relentless drive towards an incident-free workplace. In addition to our outstanding safety record, we have started the year with very strong first quarter results, carrying on the momentum we built in 2016. As reported in yesterday’s earnings release, the company generated adjusted net income of $4 million in the first quarter, or $0.01 per diluted share on $785 million in revenue. Our continued commitment to maximizing uptime and performance for our customers, combined with the efficiencies we’ve achieved through streamlining our business and our processes have enabled us to remain profitable in this challenging market. As a testament to our uptime performance, for the quarter, revenue efficiency was 97.8%. Of note, we delivered this performance while placing into service our third newbuild drillship within the last 12 months, the Deepwater Conqueror, which has performed almost flawlessly since commencing operations for Chevron. Needless to say, we’re very pleased with this outcome and it validates the extreme focus we placed on ensuring that our newbuild assets are ready to exceed our customer’s expectations from day one. In addition to our strong uptime performance, we continue to focus more intensely on improving the efficiency and consistency with which we conduct well construction activities. Over the past three months, we launched our performance dashboard, which provides us with increased monitoring of key benchmarks from crew to…

Thank you, Jeremy, and good day to all. For today’s call, I will recap the first quarter results and provide an update to our 2017 guidance. I’ll also provide an update to our financial position and liquidity forecast through 2018. For the first quarter of 2017, we reported net income attributable to controlling interest of $91 million, or $0.23 per diluted share. As detailed in our press release, first quarter results included $87 million, or $0.22 per diluted share in net favorable items. Excluding these items, adjusted net income was $4 million, or $0.01 per diluted share. Contract drilling revenue decreased $35 million sequentially to $738 million, due largely to reduce activity related to 215 fewer operating days. Offsetting this decrease was a full quarter’s contribution from our latest deepwater drillship, the Deepwater Conqueror, and higher day rates associated with a change in the operating location to the Gulf of Mexico from Trinidad on the ultra-deepwater drillship, Deepwater Invictus. And as Jeremy mentioned, we achieved another solid quarter of revenue efficiency of 97.8%. So consistent delivery of 95% with better uptime for 12 of the past 13 quarters, we continue to effectively monetize our backlog. Other revenue was $47 million, which included customer reimbursables and $37 million associated with early termination fees. This compares with $181 million in the prior quarter. First quarter’s operating and maintenance expense was $343 million, which included $8 million in favorable items associated with litigation matters. This compares with $314 million in the prior quarter, which also included favorable litigation matters totaling $30 million. Sequential difference was due primarily to the commencement of operations of Deepwater Conqueror and a full quarter of activity on the Transocean Arctic. First quarter OpEx was slightly below our forecast, due largely to a performance litigation matter and a delay…

Thanks, Mark, and good day to everyone. I’d like to start off today’s call by celebrating an important and strategic contract we recently won. Our extensive customer relationship and innovative commercial model helped us capture multiple well programs in both the UK and Norway with Statoil for the harsh environment semisubmersible Transocean Spitsbergen, adding approximately $83 million in contract backlog. The Spitsbergen has delivered some of the best harsh environment wells in the industry. You may recall that the last well this Spitsbergen drilled for Statoil was named the perfect well based on the speed in which it was drilled, blowing away their technical limit. We are further excited to be contracting her in conjunction with an integrated package of services, that includes the ROV and casing running plus performance incentives with the expectation we can continue to increase our drilling efficiency. The initial contract award is for three exploration wells with an estimated duration of 90 days in the UK sector of the North Sea. This contract includes a price option for an additional well with an estimated duration of 30 days. The second contract in the Norwegian North Sea is for six production wells with an estimated duration of one year. This contract includes price options for an additional six exploration wells with an estimated total duration of 180 days. The first contract is scheduled to commence in the third quarter of 2017. We are also currently seeing more positive signs of life offshore. Consistent with our optimism, we are very happy to announce a new contract award, plus four extensions in multiple operating areas. Of the five new awards, four will be commencing drilling operations in 2017. This will include the restarting of a warm-stacked 6th generation ultra-deepwater floater. Before I discuss these new awards, I’d like…

Thank you, Terry. Yolanda, I think we’re ready now to take questions. And as a reminder to our participants, please limit yourself to one question and one follow-up.

Certainly. [Operator Instructions] We’ll have first from James West with Evercore ISI. Please go ahead.

Hey, good morning, everybody.

Good morning, James.

Good morning.

Jeremy or Terry, when I look at the market overall, I think, it’s pretty easy for most people to say, okay, we’re still pretty oversupplied for floaters and jackups. The one area that perhaps is going to look here is the harsh environment really we see the pickup and we’re starting to see, I think, a real tightening there. Is that, I mean, on track on that statement that harsh environment is getting closer to some, perhaps an inflection point, or to a better place where we can easily stabilize pricing or maybe even move pricing higher?

James, I think that’s a great question, and I think you are spot on. I think what we’re seeing right now is, we’re seeing a lot of tenders coming out. And simply there’s not enough availability of hot warm and ready to go. So now you have to be looking at the opportunity of bringing some rigs out. So we think that we’re going to see some of that coming up here in the near future. We’re very optimistic.

Okay, good. And then, Jeremy, you talked about the dashboard and got a chance to see the other night. But I know that’s newer to the efficiency programs you put in place and we talked a little bit about drilling efficiency and just kind of the massive increases you’ve seen over the last probably four quarters. With the dashboard in place now, with the intro crew competition that you’ve been able to create, I guess, what kind of magnitude have we seen so far? If you could just remind us for that, and what do you see going forward increased efficiency?

Yes, great question. Thanks, James. We actually started getting intentional about this, I would say, late Q1, Q2 of last year. And so, since we started really measuring, let’s just talk tripping time for right now, because that’s where we’ve spend the majority of our time just as we started measuring in Q2 of last year through Q1 of this year, we’ve seen a 22% improvement in tripping time. If you look at when we have implemented the dashboard, which was – which is towards the beginning of Q1 just from Q4 to Q1 performance, we saw an 11% improvement in tripping time. So just by measuring making it visible to all the rig leadership and or and the show-based support, we’re already seeing improvement. And so, as we continue to mature with this particular dashboard, we’ll identify best practices, pacific crews that are over-performing benchmark on a consistent basis will take – we will go and visit them, take a look at the process, see if we can adjust our own across the fleet procedures and spread that best practice. Likewise, if we see a crew or rig that’s underperforming, we can quickly send a SWAT team out there to go and address those issues as well. So that just by making it visible and intuitive and just immediately available has demonstrated – has resulted in improvement.

Okay. Okay, perfect. Thanks, guys. I appreciate it.

We’ll take our next question from Ange Sedita with UBS.

Thanks. Good morning, guys.

Good morning.

So, Terry, really impressed of the number of contracts you’ve signed here on the short-term and reactivation of some – reactivating rigs and so forth. But can you talk about oil prices as far as if oil prices stay in the mid $40s, do you think the tone of the conversations could change or the quantity of conversations could slow or still would continue in the $45, $46 level?

Angie, with the activity that we are seeing right now and the tenders that are coming up, I think largely the customers are ignoring at the moment that were the burn-ins today, I mean we’re hovering right now around $50 right, so they are ignoring and the tenders that we are seeing in the future years, there is a lot and it’s not just confined to UK and Norway, we are seeing a lot of activity in Asia. We are seeing a lot of activity in Trinidad. Canada, we are seeing quite a few – quite a bit of interest from customers and actually having meetings with customers, asking our expertise and how do you get indication of that. So we’re now seeing a bit more of a broader look than just some of the UK, Norway digging.

Okay, so your thought is in the mid $40s, the pace of conversations would not slow?

Well, we’re seeing it now and I don’t think they expect – certainly our expectation is that we are going to see oil will stabilize and improve. And I know that we don’t have the crystal ball, but I think that that’s what our customers are telling us too.

Okay, okay that’s very helpful and very impressive on your – the contract wins. And another one quickly for Jeremy, I know you’ve been a proponent of M&A both on looking at other companies, as well as buying individual assets, but I guess the separate question would be, do you think there’s anything to be gained by the established contract drillers merging with each other?

Yes, for us it’s not so much about size, Angie, it is about asset quality, so to the extent that we can first agree on valuations, which has been kind of a holdup today. But to the extent that we can bring some new high-quality assets into our fleet, we think that there are some opportunities there for us. Now, looking at some of the larger more established traditionals coming together, I suppose there could be some benefit for that, but for us it’s really around fleet quality and really targeting ultra-deepwater and harsh environment.

Okay, okay, fair enough. And then real quick for Jeremy, you guys talked about additional structural cost savings, can you give us some further color?

I think it’s just this market has forced us all as an industry and certainly us at Transocean to just take a really hard look at how we conduct business. And so as we continue to do that, I mean, we’re implementing changes whether it be structural, process-driven, technology driven changes that that will enable us to grow as the market improves without adding a lot of cost to our support base and so that’s really the focus for us now. We’ve obviously reaped all the low hanging fruit and now it’s really getting to this process and structural issues that are sustainable despite growth.

Great, thanks I’ll turn it over.

Thank you. [Operator Instructions] At this time, we’ll hear next from Ian Macpherson with Simmons. Please go ahead.

Thanks, good morning. I wanted to ask you Jeremy or Terry really congratulations on the contract for the Spitsbergen with Statoil? And then wondering if you could talk about whether that integrated service approach in the performance structure of the contract was really hold from the customer or push back Transocean and how prevalent you see that becoming going forward? And also are the integrated services such as the casing running, are you subcontracting that to a third-party or is that a capability that you are providing in-house?

Okay, good morning, Ian. To answer the first question, and thank you by the way the teams have done a marvelous job working on that contract and the contract specifications actually require that we take on some services that Statoil believe that we have the capability so to do as contract drillers, so that was mandated by the contract. But also we found it to be very positive. They also included the performance incentive and we were able to negotiate something that we were very interested in and also something that we would be winning and they would be winning, so we’re very, very happy with all of those things. In working with third parties, there are some synergies on the rig where we can actually take on fewer people from the casing crew, we would still bring obviously the third-party expertise on, but there are some synergies where casing crew, where our crews can’t do the function of some of the casing crews, and there are some savings there. But this is a very exciting opportunity that we can showcase with our ability to understand the areas that we drill in and also to demonstrate our incredibly efficient drilling and operational expertise, so we are very excited about this opportunity.

Good, well congratulations on that. I wanted to follow-up on Angie’s question on sort of the price elasticity of demand, Brazil specifically, I think we think of the pre-salt having superior well economics to a lot of the other ultra-deepwater. Would you suppose that the opportunities there are probably the sturdiest with regard to price volatility over the next few months?

I’d say that’s fair. I mean, Brazil is always a question, because there is always so much going on, but I’d say here recently all the indications are very positive right now and I think you are right, I think the oil did drop a bit that that programs would continue in Brazil and they would continue with their plans.

Okay, thanks Jeremy.

Thank you.

Our next question will from Ole Slorer with Morgan Stanley. Please go ahead.

Yes. Thank you very much. I wonder whether you could expand a little bit more on the efficiencies. You touched briefly on this, more process oriented, but we’re hearing more and more about preventive maintenance models and kind of changing total cost of ownership. A lot of your competitors are capitalizing what I would call maintenance cost, so you can take that into account when it comes to the total cost of ownership. So Jeremy I just wonder whether you could expand a little bit more on how you’re taking it to the next level?

Yes, sure, thanks a lot, thanks a lot for the question. So we recently entered into agreements with the two large OEMs, they’ve put out public releases on that, one was GE the other was Cameron – Schlumberger. And the approach that we took in both of those cases was to look at the total lifecycle cost of the asset. So we started BOP and so you look at our pressure control equipment, you look at the total cost over a 10-year period, you factor in the five-year and 10-year overhauls and you can see what that cost you over the 10 years and so our approach would be, in OEMs words, hey, we need to bring that cost over the 10-year period down. We would like to make it more predictable and we’d like to get away from calendar based overhauls and really move to more reliability centered maintenance. And so we’ve worked really closely with them to build a model that I mean, guarantee that they must lower cost than we historically incurred over the 10-year life of the asset and smooth out our costs on a monthly and quarterly basis. And so through closer coordination we are guaranteeing ourselves now at lower cost of ownership over the 10 years. Now added to that, we also want to continue to bring improved reliability to our customers and so as a sweetener for the OEM to the extent that we can reduce downtime, reduce the number of unplanned poles on these stacks, there is a bonus in a form. And so that’s really a complete alignment between our customer, ourselves and the OEM. And so we’ve done that with across the pressure control equipment with GE and Cameron. We are working on other pieces of critical equipment with other OEMs on similar types of models and so you won’t see the cost-benefit, probably in the first couple of years it will be relatively flat, hopefully we’ll see continued uptime performance improvements. But then as you get into your five and your 10, when you would have incurred those large overhauls, that’s when you start to really recognize the savings.

Thanks for that Jeremy. One follow-up question, on the recent reactivation of the sixth generation rig, how – what was the overhead cost to achieve that?

You are referring to the Asgard, Ole?

Yes.

You know that’s not going to be much because we’re looking mainly at adding some of the junior crews to the rig, so everything is coming to one stack in the Gulf of Mexico. So to reactivate that and any other rig that is one stack, it runs $5 million and most of that’s around labor.

$5 million, okay well, thanks for that guys, now I’ll hand it back.

Thanks Ole.

Thank you. We’ll move now to Greg Lewis with Credit Suisse. Please go ahead.

Yes, thank you and good morning. Terry, I just had a question for your regarding – you talked about some of your customer conversations with, I guess, the oil price coming down for deepwater projects being more competitive. As you talk to your customers, do you get a sense that they are making these projection based on the rig environment in terms of pricing not worrying today, or do we get a sense that since these are multi-year endeavors that they are thinking more around or more of a normalized rig rate? What is that mattering?

I think it’s a really good question. I mean the customers that we deal with, they are fully understanding that, rig rates are going to go up. Whenever, you know – and they’ll break that into their five year plan, so they’ll run a model like you’ll run a model based on the assumptions of how the supply and demand of the commodity. So they’re really structurally changing the game and it’s – you know part of the conversations we’ve been having is, these are sustaining cuts that they believe it’s that, they’re not going to see a whole lot more rising except for what you would expect. Services are going to increase and labor is going to increase; but the structural changes have been standardization of their program. You know their subsea programs that’s where a significant amount of their savings are coming from and they’re just able to do things just like we have, just to be able to focus on taking costs out of the system that will be everlasting. So, I don’t think that you know it’s from the rig rates they have any dilutions that would be this low over the next five years.

Okay, great and then just with the, you know the potential or I guess jack-up sale ongoing. Just given that there was some backlog associated with a couple of those rigs, did the count – did the rig customer need to be involved in that negotiation he made aware of it, does that potentially impact that contract given the change of control, any color around that anyone can provide?

Yes, thanks Greg. With regards to that transaction, we intent to operate the rig through the remaining term of the contract. So, as I mentioned in my prepared comments, included then the compensation for those rigs is about $80 million of backlog, which we retain through operating those rigs through the end. So Chevron was not a party to the transaction.

Having said that they were informed, yes, but we’ve had several conversations with both their corporate, as well as the regional leadership and just to assure them performance would continue as per usual.

Okay and then Terry, I guess, maybe on the squeezing on the one end, just as we think about it that, I mean you guys have – just sort of your jack-up fleet, what is the customers feedback and like is anyone saying, hey, can you go buy some more jack-up rigs so we can contract the jack-up rig from you?

That’s a great question. I think one of our major customers always asked us the question, why is it www.deepwater.com when you own jack-ups. So, we made the decision and I think it’s in a clear strategy that we talk about all the time is that we’re focused on high specification floaters and harsh environments, so that’s where we’re heading and we are excited about it.

And visiting with multiple customers since the board and after the Letter of Intent and most have expressed just congratulations. They thought it was actually a good move for us to really focus on the deepwater and harsh environment and really streamline our service offering and our story. So, I don’t think there has been any negative. There is certainly no pushback from any customers so far.

Okay, hey great everybody. Thank you for the time.

Thanks Greg.

Our next question will come from Rob MacKenzie with Iberia Capital. Please go ahead.

Thanks, good morning all.

Good morning.

Terry, I wanted to come back to your comments on tenders and the customer outlook and in particular, if you could frame it for us a little differently perhaps. You know subjectively you talked about a lot of tenders in a number of markets, but how would you contrast against, I guess, industry wide, the number of rigs that are rolling off contract. Are those tenders enough to keep all that reporting; are they enough to put back to work a handful of rigs? Can you help frame it for us in those kind of terms?

Okay, so if we look at a year ago in April and then we look to today April 17th, a year ago there was very little tendering that you could even see in 2017 and 2018. There was just no visibility, so now we roll forward one year, we’ve seen an increase of 58% of the tendering opportunities that are out there. So, that’s clearly a huge indication of where we were a year ago to where we are today. You look at you know harsh environment to talk about that and we’ll talk about contract years because the contracts that had been so small duration. So last year, there was about 30 rig years of harsh environment executed. This year, we expect that we’re going to see 40. So things have – so things are really, you can see an incremental increase, and then let’s just look at the number of floater fixtures. For the last two years, we have executed 69 floater – total floater fixtures. Today, we’ve already executed almost 30, and we’re only at the end of April. So it – so that kind of gives you an idea of, definitely you can see the increase. There are a lot of tenders out there that haven’t even really that we’re hearing about and that are not becoming public. So we’re now seeing a little bit more of direct negotiation opportunity and that’s always a good indicator, because if you’ve got a lot of folks that you want to work with, you would definitely put most of these things to the tender. As far as rollover of fleet – in the olden day, rollover of fleet used to be about 50%, and that wouldn’t even go into the demand column. They would just be rolled over. So the day when you look at the rollovers coming off, there’s a big, there’s a large amount of rollovers. But if I look at the tenders that are out there, I don’t see a lot of tenders being priced against the rollovers. So maybe two or three. So these are things that we’re really, as we said, we’re going to focus on the milestones and focus on opportunities. And we are seeing a certainly positive signs right now.

Great. Thank you. Good answer. That’s all I have.

Thank you.

Thank you, Rob.

[Operator Instructions] We’ll go next to Colin Davies with Bernstein. Please go ahead.

Good morning. Just to expand a little bit on the conversation around the nature of the tendering market. I think on the last call, you talked about the nature of the customer base, perhaps that broadening out to NOCs and independents. Can you give some color around, is the breadth of this increasing, tendering, are you seeing the majors reengaging on a large scale, or is it more broad across, large independents and NOCs?

We’re not seeing in this – increase in tendering right now. We’re not seeing a huge representation of the majors. But we’re seeing a very large representation of the IOCs and some NOCs. So that’s – this is typically what happens when you’re coming out of the cycle, you’ll see – it will shift, because the majors have already gone long and they’re working off their – they’re working off their term, whereas the independent, they’re always – they always have their inventory ready to go. And so do the NOCs, they’ll typically work through the cycles, the lower cycle anyway. So that’s what we’re seeing.

That’s very helpful. And then just a follow-up on the supply side, given what you’re seeing now in the marketplace and the tendering activity, how are you thinking about the supply side portfolio perhaps your attitude to your own scraping and perhaps what you’re seeing across the industry more broadly. Do you see that that level of supply side adjustment begin to slowdown in anyway?

Yes, the one thing I would say to start this is, don’t look at the absolute number on the supply side. I think that would be a mistake for a number of reasons. One, if you look at the total supply, there are a number of rigs in there that just don’t have the technical capability that our customers are demanding in the current environment. And so you can go and you can cut a few out there. Then Terry mentioned that that customer are putting a greater focus on financial stability of drilling contractors, so you can probably take a few out there. And then we know for a fact that a lot of these rigs that they’re being stacked are not being preserved the way that they need to be preserved. And so the cost to reactivate them are going to be prohibitive. And so, I think if you look at the total – the absolute number on the supply side, you’d probably be making a bit of a mistake. So I don’t think the supply side is near and the gap is nearly as wide as it seems just by looking at the absolute numbers. So, I would say, that would be my starting point. With respect to continued retirement, we have retired 31 rigs from our fleet over the course of last two-and-a-half years, I guess, it is. We continue to evaluate our fleet on a regular basis. And as we get a little more visibility to the downturn and customer sentiment, we run models to say what’s it going to cost to reactivate this rig. Does it require upgrades? What does that cost? What do we think the first day rates going to look like? And as time evolves, we may make the decision on some of our rigs to say, what – it’s time to go ahead and scrap it, can’t speak for the rest of the industry, but that that’s our approach.

That’s very helpful. Thank you very much. I’ll turn it back.

Thank you.

And our final question today will come from Ian Macpherson with Simmons. Please go ahead.

Hey, thanks for the follow-up. This is for you, Mark. You – your O&M guidance for the year of 1.4 to 1.45 does not assume the jackup sale. Would I be correct in estimating that would be about $100 million on an annualized basis at current activity levels for the jackups?

That’s probably close, Ian. I don’t want to give definitive color on that yet, because as I mentioned, we are operating some of those rigs through the end of their contracts, which can run through second-half of next year in some cases. But that doesn’t seem unreasonable.

Okay. Thank you.

Thank you.

And with that being our final question, I would like to turn the conference back over to Brad Alexander for any additional or closing remarks.

Thank you to everyone for your participation on today’s call. If you have further questions, please feel free to contact me. We will look forward to talking with you again when we report our second quarter 2017 earnings results. Have a nice day.

That will conclude today’s conference. Thank you all once again for your participation.