Good day, and welcome to the First Quarter 2018 Transocean Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Bradley Alexander, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Christina. Good morning, and welcome to Transocean's First Quarter 2018 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 Roddie Mackenzie, Vice President of Marketing and Contracts. During the course of this call, management 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. When we get to the question-and-answer session, to give more participants an opportunity to speak on this call, please limit yourself to an initial question and one follow-up. Thank you. And now, I'll turn the call over to Jeremy. [005J94-E Jeremy Thigpen] Thank you, Brad. And a warm welcome to our employees, customers, investors and analysts participating in today's call. As reported in yesterday's earnings release, for the first quarter, the company generated adjusted normalized EBITDA of $170 million on $645 million in adjusted normalized revenue. These results were driven by a combination of strong uptime performance and a continued focus on organizational and operational efficiency. Operationally, when normalizing for the downtime associated with safely returning the Petrobras 10000 back to work, we delivered first…

Thank you, Jeremy, and good day to all. During today's call, I will recap our first quarter results, provide updated second quarter and full-year 2018 guidance and update our liquidity forecast through 2019. For the first quarter of 2018, we reported a net loss attributable to controlling interest of $210 million or $0.48 per diluted share. Highlights for the quarter include two months of operations on the four CAT-D harsh environment semisubmersibles required as part of the Songa acquisition, 48 days of operations from a newbuild Deepwater Poseidon which commenced operations in the U.S. Gulf of Mexico on February 12, and a full quarter of activity for the newbuild Deepwater Pontus which commenced operations in the fourth quarter of 2017. Let me now address two revenue-related items in more detail. Firstly and related to the Songa acquisition, pursuant to purchase price accounting rules, we calculate the fair value of the four Cat-D drilling contracts by comparing them to current market day rates and expectation of future market day rates during the term of these contracts. The difference being reported as contract intangible assets. The contract intangible assets associated with the Songa totaled $232 million at closing and will be amortized over the remaining term of the drilling contracts on a straight-line basis. Accordingly, in the first quarter of 2018, we recorded a non-cash reduction in contract drilling revenues of $19 million. This amount is included in contract drilling revenues on a consolidated statement of operations and presented on a separate line on the statement of cash flows. A schedule detailing the expected quarterly contract intangible amortization is now available on our website. Secondly, we adopted ASC 606, the new revenue accounting standard effective January 1, 2018. As a result of this adoption, we have determined that the drilling and related…

Thanks, Mark. Christina, we're now ready to take questions. And as a reminder to all participants, please limit yourself to one question and one follow-up question.

Thank you. And we'll take our first question from James West with Evercore ISI.

Good morning, guys.

Good morning, James.

Jeremy, clearly the harsh environment market has picked up nicely and tightened nicely. Do you have any thoughts on the true seventh gen market? I mean, those really high-spec, high-end rigs. The 36 or so that are out there – or really 26, I guess, with 10 in the shipyard, on when that market may see a tightening. It seems to me there's a number of large oil companies looking for that specific rig right now with very few uncontracted that are available for work today.

Yeah. No. That's exactly right. I'll let Roddie handle that one.

Hey, James. Okay. So, to kind of give you a picture that you're spot on that the high-spec rigs are in high demand there in the ultra-deepwater side. So, we're seeing several programs. In fact, we were just going through our numbers here. But there has been a doubling of project sanctioning from last year to this year. And there's a projected doubling again into 2019.

Okay.

So, what we're beginning to see now is a lot of them – a lot of push to bring those better rigs back to the market. And actually, the other thing I was going to mention in this realm is looking at utilization, we look at effective utilization. So, the actual supply of good floaters is really only somewhere in the region of kind of 160 or so rigs. And with 120 of them working today, our utilization is already in the mid 70s, and just with a little bit of uptick that we're all projecting. In fact, we were at Clarksons yesterday, they're showing a nice uptick plan for 2019. Utilization should be in 2019 well into the 80s and approaching the 90 mark. So, your answer is yes, those big rigs with a nice specifications are going to go pretty soon.

Okay. That's great.

Well, and we hope that day rates follow as they did with the harsh environment space.

Got you. Okay. That's great to hear. And then, as you assess your fleet further, Roddie or Jeremy or Mark, do you still have rigs that are candidates for retirement at this point or is that primarily done?

No. We still have a few rigs that are candidates for retirement. Some of them may currently be on contracts, and so certainly not going to recycle them while they're generating revenue and cash there for us.

Right.

But yeah, we are continuing to assess the fleet. And as we learn more about the direction of the industry and the eventual market recovery and continue to update our reactivation models, what that cost looks like, we'll continue to take action as needed.

Okay. Great. All right. Thanks, guys.

Thanks, James.

We'll take our next question from Angie Sedita with UBS.

Thanks. Good morning, guys.

Good morning, Angie.

Good morning.

So, Jeremy, maybe you could talk a little bit about your commentary on M&A and individual assets that you had in your prepared remarks. Maybe on the M&A side, you mentioned, right, a focus on high-spec assets with backlog. Are there companies out there that meet those specs that offer both high-spec assets and the backlog? And then, two, on the individual assets, maybe a little bit of criteria there as far as specs timing? And would you need to have a contract in hand before acting on a transaction?

Yeah. Good question, Angie. And the pickings are slim. And that's why you haven't seen more transactions in this space. There are certainly candidates out there that we feel have the right mix of asset quality and then some kind of combination of backlog to offset near-dated maturities, but they're few and far between. So, we are certainly looking and trying to progress those discussions, but it is a challenge. With respect to individual assets, given what we've seen in the harsh environment space with not only utilization picking up for the high-spec rigs but followed by day rates which have more than doubled over the last two months, if we were going to go out and acquire individual assets, you'd probably see us more inclined to look at the harsh environment space than the ultra-deepwater space at this point. But we're certainly encouraged by what we're seeing in the ultra-deepwater as well.

Okay. All right. That's helpful. And then, on the comments on Mexico, potentially some opportunities later this year. Any thoughts there on how many rigs we could see moving into Mexico, either late this year or 2009 (sic) [2019] and the specs they're looking for in short-term or longer-term work?

Yeah, Angie. I'll take that one. Certainly, the excitement around Mexico was just palpable amongst the customers where our sales, just Transocean's fleet, looking at our opportunities are right in front of us. By mid-2019, we could have up to four rigs, maybe even more in Mexico. The overall industry as a whole, you've got to extrapolate that out and see if they're going to be perhaps in the teens in terms of number of rigs. But as we said in the previous call, moving into Mexico with a couple of our existing customers that have rigs under contract is a great segue to get in there. But now, we're seeing that it's a very real possibility that we're going to move in on several new contracts as well.

Yeah.

So, we're very encouraged by that.

And regarding your question around the spec, it would be the exact same spec that you see in the U.S. side of the Gulf of Mexico. So, you're looking for dual activity, high hook load, two BOPs, got highly-efficient rigs.

Okay. Okay. Great. And then, those are shorter-term contracts, or longer, or mixed?

It's a mix. It's kind of all over the place. It's primarily exploration work, right? But there's a mix of just one or two wells, but then there's also programs that will be a year or longer.

Okay. Great. Thank you. I'll turn it over.

Thanks, Angie.

We'll take our next question from Blake Hancock with Howard Weil.

Thanks. Good morning, guys.

Hey. Good morning, Blake.

Hey, Jeremy. Maybe first, as we think about the cold-stacked assets and you talked about the Goodrich and the ability to generate cash flow exceeding the reactivation costs. You've kind of laid out what you think reactivation would be on some of these other rigs. Can you maybe talk about the criteria, what you would expect? Would you expect a payback on kind of your reactivation on the first contract? Peers out there are doing the same thing, but not getting paid back on that first deal. So, maybe you could talk about the strategy there as you think about the improvement in environment.

Yeah. I mean, candidly, in the current market, it's tough to get paid back on that first contract. So, as we assess whether or not we want to reactivate a rig, we want to see not only the first contract. And of course, get as much as we possibly can as part of that contract. But then, what are the follow-on opportunities. And so far, as we've looked at that, we've seen several follow-on opportunities that any one of, say, three could materialize. And that's what gave us the confidence to go forward with the reactivation. So, there's not an exact science to it. I can assure you that Mark pushes back pretty hard on it as he should whenever Roddie comes up with new opportunities to reactivate rigs. But so far, I think the process has worked well for us. We've been rewarded with every rig that we have reactivated to get some follow-on work, and so we're going to continue to follow that process.

Yeah, Blake. I'd also add in there that those strategic assets that we think are going to be very strong players in the future helps in the decision making, but we also look at some of the older rigs as well that are fit for purpose for the right markets. And as we saw with the Goodrich, that worked extremely well, so that's certainly an older vintage asset pulling down some really nice numbers. And we're currently engaged in a couple of other things that we'll let you know about it once they're committed. But that would reactivate rigs again that are a little bit older but with very solid financials to not only pay for the reactivations, but move those rigs into a good profitable space in the first contract.

That's great. Thanks, guys. And then, part Jeremy, part Roddie here. Jeremy, on the Asgard, can you give us an update? You kind of talked about holding out here for pricing. What do you think is acceptable if we were to term out that rig? And Roddie, update on the contracting potentials for the Asgard and maybe the DD-3?

Yeah. I mean, I'll just start and then turn over to Roddie. If you'd asked this question a year, 18 months ago, we probably would've been inclined to lock up a rig like the Asgard for 12, even 24 months. But then anything beyond that, we'd want to have some kind of market-driven fluctuation increase in day rate to give us some optionality in the outer years and some upside. Today, I think given what we're seeing, we'd be less inclined to go that kind of duration, probably more inclined to look at something no longer than 12 months before we would start to get some day rate appreciation. And so, I think that's kind of how we're thinking about rigs like the Asgard right now, and then I'll let Roddie elaborate.

Yeah, no, that's spot on. So, the Asgard is arguably one of the very best available rigs in the market today, and we are pursuing short-term activity for her until we see that window where we can really push the rate on her because she is extremely capable. And you also asked about the DD-3. So, when you think about the DD-3 in a similar fashion, very interested in putting her in the right spot where she has that unique DP by moored capability, and she's a dual-activity rig. So, finding the right job for that, we're cautiously optimistic we'll have something to tell you about pretty soon on her.

That's great. Thank you, guys.

Thanks, Blake.

We will take our next question from Haithum Nokta with Clarksons Platou Securities.

Hi, good morning. Roddie, I wanted to follow up on the comments about the high-spec ultra-deepwater market tightening. And do you see that as, I guess, sustainable even if rates start to rise in that segment? Do operators just say, all right, I can work with, call it, single activity or I can go without dual BOP? Is that something that you see that could actually be a risk to that outlook?

I'll tell you what we see is that the operators, how would you say, are not opposed to paying more money for the rigs. But what they're really opposed to is paying more money for the wells. So, with the efficiency that we're delivering on these high-spec assets, even with the higher day rate, they're still getting a tremendously low cost of ownership for the wells, better than it's ever been actually. So, we just think that that will be sustainable environment. And I think we will be able to see some, how would you say it, appropriate day rates coming out in 2019.

That's good to hear. And then, I wanted to ask about the Spitsbergen extension that you had announced in the recent fleet status report, but you also had basically a shorter firm duration on the contract, and I assume that's basically performance driven. And I guess are you guys able to positively benefit from that shorter duration in the contract structure? Or kind of how should we think about improved sufficiency from a financial perspective?

Yes, so you're spot on. The rig is just drilling like crazy. She's doing a fantastic job in organizing these wells for Statoil. So, in that contract, we have a series of options before the next big firm term period. So, Statoil was picking up those options as we go. They've got several partners that are interested in it. And of course, the performance of the rig speaks for itself. In terms of upside for us, that rig is on a performance bonus contract. So, the better we drill, the more upside there is for us. So, our compensation is linked to our performance.

And that's something that you're trying to add to more areas of the fleet at this time, performance driven?

Yeah, we believe that's a very positive business model for our entire industry actually. We view ourselves as competing against other places where operators can spend their capital. So, making ultra-deepwater as competitive as you possibly can and making harsh environment competitive is what we're all about. So, we do welcome that because our operations teams around the world are the very best in the world, and they're delivering fantastic performance. So, it kind of gives the operators the opportunity to pick up a rig on a pretty reasonable headline rate, but also be able to pay for a significant performance that gives us a per day higher-margin on those rigs. So, it's kind of a win-win situation. And the answer is yes, the customers are very interested in that performance alignment.

Thank you, I will turn it back.

We will take our next question from Ian Macpherson with Simmons. Ian Macpherson - Simmons & Company: Hi, good morning, everyone.

Good morning, Ian. Ian Macpherson - Simmons & Company: I guess my first question will be back to the M&A strategy. If things are really so close to tightening, as it sounds like they could be, not only do you want to be careful with your contract length, but you also want to be careful with your use of equity. And it's terrific that Songa has been in every way, it was a very equity intensive transaction for you. So, Jeremy, what would be your attitude towards the use of equity in future M&A given how close it feels that we may be to recovery and a $12 stock price for Transocean today?

Yeah. That's a great question because you're right, we look at this pretty carefully. And when the Songa transaction was negotiated last August when honestly it was negotiated over the previous several months, if you recall, at that time the harsh environment had barely moved and clearly the industry was not experiencing the level of optimism we're seeing today. So, shoring up our balance sheet by overequitizing a transaction was certainly the right way to go. I think we are in a different place now. And I do think that we expect ultra-deepwater to follow harsh environment over the next few quarters. So, as we look at opportunities, we get a little more comfortable with our balance sheet and especially our level of liquidity. We would be more inclined to use cash or a bigger mix of cash in a corporate transaction. Obviously, in an asset transaction, there would be cash only. So, we certainly do reflect your views on this. Ian Macpherson - Simmons & Company: Okay. Thanks, Mark. I have another question also for you. And I'd want to clarify the revenue guidance for Q2. If we go up 14% sequentially, that's $757 million, and you said that includes terminations, intangibles, and reimbursables. So, if we added back the intangibles, would it therefore be cash revenue of, what is it, I guess $786 million. Is that what we should be thinking about?

If that's the calculation, Ian, then that's correct. Yes. The fact that we have not been disclosing day rates on our fleet status reports, we thought that by starting to give you some guidance on the revenue on the call would make it a little easier for you to get closer to the revenue for the quarter. So, that's what we had finally achieved with that. Ian Macpherson - Simmons & Company: Okay. Thank you very much. Good quarter.

We'll take our last question from Colin Davies with Bernstein. Colin Davies - Sanford C. Bernstein & Co. LLC: Good morning. I wonder if you would give us a little bit more color on the nature of the performance bonuses that you talked about. I mean, it sounds like that could become the precursor to gaining some pricing traction in the market, but how significant are we talking about in terms of sort of an uplift from the headline rates you were mentioning? I mean, are we talking tenths of percents or just sort of single digits?

So, I'll take that one. So, we have various different models and there are a few that are relatively small numbers. But the increasing trend at the moment is that we're seeing bonus potentials of 10%, 15%, 20%, and in some cases 30% and beyond possibility, which is really significant. Now, obviously you have to deliver really top-tier performance for that, but we have done that in several instances. So, we really think that is a way forwards. And you're right, it's a way of getting our effective day rates up nicely compared to where we used to be, at the same time, allowing the operators to get an AFE over the line, so to speak.

Yeah.

And giving us all that potential to perform and add a lot more money. But in short, the bonuses are significant. And in fact, it seems to be the higher the day rate, the higher the bonus percentage as well, so – in harsh environment, that seems to be leading the way where you're seeing routinely potentials of 15% to 20%. Colin Davies - Sanford C. Bernstein & Co. LLC: Okay. That's really helpful. And then, just a follow-up question. I mean, if I look at just – take a step back and look at the contract expiry portfolio, I mean there's a lot of rigs coming off sort of back end of the second half of 2018 just as you're sort of describing the market to be tightening in certain of those categories. But you've also got a large option portfolio as well, if I look at the Fleet Status Report. What happens next? If the market is tightening, do you see customers really starting to lock in those options?

Yes, certainly. So, so far, we have actually seen them locking up options. So, most of the options are picked up. I think the pickup rate is over 80% of a number of options that get picked up, so – but in terms of where that goes going forward, so options being offered, we're being a bit more stringent on that now, right. Especially in the tighter market, we're tending not to offer as many options or we're pushing back on strike dates, so that they're picked up into firm work a lot earlier. Colin Davies - Sanford C. Bernstein & Co. LLC: Yeah. That makes sense. That makes sense. And you managed to getting some – on the longer options, you managed to get some pricing on those as well?

Yeah. So, as Jeremy said, we've been very balanced in how many rigs we commit to long-term prospects in the down market. And all the ones that we do have on longer periods in every case, the option rates go up. So, we can point to the Norway ones because they're the easiest. But the option rates go up quite significantly. And they're still picking up the options, so that's a good sign. But fairly even on the ultra-deepwater ones, a couple of long-term ones that we signed during a downturn, all of them have higher option periods, higher option rates. So, some of them are hardwired that will go up by a certain percentage. And some of them are actually linked to things like oil price commodity or average day rate of floaters. So, when we saw options being requested in later years like 2019 and 2020 and 2021, that's kind of the way we played it to make sure that we didn't lock ourselves into lower rates into the early 20s, but – so we should see some good upside on some of those longer ones. Colin Davies - Sanford C. Bernstein & Co. LLC: Very interesting. Thank you. I'll hand it back.

And that concludes today's question-and-answer session. Mr. Alexander, at this time, I will turn the conference back to you for any additional or closing remarks.

Thank you, Christina, and thank you, everyone, for your participation on today's call. If you have any further questions, please feel free to contact me. We look forward to talking with you again when we report our second quarter 2018 results. Have a good day.

And this concludes today's call. Thank you for your participation. You may now disconnect.