Good day, and welcome to the Q4 2021 Transocean Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Cale Dillingham. Please go ahead, sir.

Thank you, Cynthia. Good morning, and welcome to Transocean’s fourth quarter 2021 earnings conference call. A copy of our press release covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures, are posted on our website at deepwater.com. Joining me on this morning’s call are Jeremy Thigpen, Chief Executive Officer; Keelan Adamson, President and Chief Operating Officer; Mark Mey, Executive Vice President and Chief Financial Officer; and Roddie Mackenzie, Executive Vice President and Chief Commercial Officer. During the course of this call, Transocean 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 current expectations and certain assumptions and therefore, are subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and for more information regarding certain 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. Following Jeremy and Mark’s prepared comments, we will conduct a question-and-answer session with our team. During this time, to give more participants an opportunity to speak on this call, please limit yourself to one initial question and one follow-up. Thank you very much. I’ll now turn the call over to Jeremy.

Thank you, Cale, and welcome to our employees, customers, investors and analysts participating in today’s call. As all of you are acutely aware, the past seven years have been unbelievably challenging for our industry. And with the global spread of multiple variants of the COVID-19 virus, the past couple of years have exacerbated those challenges, and introduce complexities and uncertainties never before experienced in offshore drilling. Through it all, through the resilience, commitment and expertise of the Transocean team, we have delivered the same consistent high-level of service that our customers have grown to expect from us by proactively adapting to the unique circumstances of each customer, project and operating jurisdiction. We've also been able to accomplish extraordinary results in the face of dynamic environments by taking the necessary actions to ensure the safety of our employees and all parties aboard our rigs who helped to generate our superior operational results. Although the pandemic has presented unique challenges, we did what we have always done and will continue to do, create technical and logistical solutions that enable our customers to execute their drilling campaigns as efficiently as possible. In fact, in 2021, we surpassed both our internal and our customers’ expectations as we generated the highest uptime performance in the history of Transocean and earned a record number of customer bonuses due to outstanding operating performance. As reported in yesterday's earnings release, for the fourth quarter, we delivered adjusted EBITDA of $250 million on $671 million in adjusted revenue. The strong operating performance was driven by our team of experienced professionals, and resulted in a fleet wide revenue efficiency of over 94.5% for the quarter and 97% for the year, our highest annual revenue efficiency rate in Transocean’s history. Our record setting annual revenue efficiency is even more impressive considering…

Thank you, Jeremy. Good day to all. During today's call, I will briefly recap our fourth quarter results and then provide guidance for the first quarter as well as an update of expectations for the full year 2022. Lastly, I'll provide an update on our liquidity forecast through the first half of 2023. As reported in our press release, which includes additional detail on our results for the fourth quarter of 2021, we reported a net loss attributable to controlling interest of $260 million or $0.40 per diluted share. After certain adjustments as stated in yesterday's press release, we reported adjusted net loss of $126 million. Highlights for the fourth quarter include: adjusted EBITDA of $250 million, reflecting generally good performance despite unexpected downtime on the PONTUS; cash flow generated from operating activities during the fourth quarter was approximately $185 million, up from $140 million in the previous quarter, largely due to the timing of interest payments and reduced income tax payments.; free cash flow generated during the fourth quarter was $114 million. Looking closely at our results during the fourth quarter, we delivered adjusted contract drilling revenues of $671 million, an average day rate of $352,000. This is consistent with our guidance and reflects strong revenue generation across the fleet that offset downtime for an operational event previously discussed. Operating and maintenance expense for the fourth quarter was $430 million. This is above our guidance primarily due to the identification of certain excess materials and supplies that resulted in a $28 million non-cash charge in the period. Turning to cash flow and balance sheet we ended the fourth quarter with total liquidity of approximately $2.7 million, including unrestricted cash and cash equivalents of approximately $975 million. Approximately $370 million of restricted cash for debt service and $1.3 billion from…

Thanks, Mark. Cynthia, we're now ready to take questions. And as a reminder, the participants limit yourself to one initial question and one follow up question.

Thank you. [Operator Instructions] We will take our first question from Thomas Johnson with Morgan Stanley. Please go ahead.

Hey, good morning. Congrats on the strong quarter, everyone. I guess just to kind of start off here on the harsh side of things, the last couple of quarters, you guys had highlighted the UK as a potential area of strength kind of moving through 2022. Could you guys just kind of give us maybe an update on your outlook for Norway versus the UK and maybe how that outlook has changed over the last few months?

Yeah. Hey, this is Roddie. I think what I'd take you through on that for the UK, what we're seeing now is things beginning to pop up. You have to remember that the UK's activity level dropped down to very, very low levels. So everything from here looks like very good growth. So what we're expecting to see is there's more demand coming on by the end of '22 and into '23, the kind of the supply chain issues of having limited availability to wellhead equipment and that kind of stuff has delayed that a little bit. But certainly, now we're seeing a lot more tenders. As Jeremy announced there, we got closed the contract for the Paul B. Loyd, and we're working on several follow-on bits of work there. So we're feeling pretty good about that. And certainly, also the P&A and decommissioning work that's being pushed through in the UK should see a marked uptick in activity in '23. In terms of Norway, we continue to see a similar level of activity. We have to remember that in Norway was the first place to see the recovery, so to speak. So our uptick in activity over the past couple of years has been particularly good. And what we're seeing now is because of the tax scheme that's being put in place and the PDOs that are expected to get approvals this year, Norway is going to be booming in the second half of '23 and '24. And in fact, most projections show that we will be at 100% utilization of all assets at that point. So it remains to be seen that all of those PDOs are approved. But certainly, the outlook for Norway looks particularly strong, again, delivered by the macro that is fantastic across the world at the moment, but also the tax schemes that have been put in place by various jurisdictions. So we really think harsh environment has a very positive outlook for '23 and '24.

Great. Thank you. And then maybe just shifting to the benign side of things. Recent day rates you guys have shown in the Gulf of Mexico have been really strong. We've seen kind of operators there start to market those projects as advantageous from just a carbon kind of footprint per barrel basis. In the past, you guys have spoken about some of the technology that you've implemented across the fleet to kind of limit emissions and increase efficiencies. Could you guys just give us an update on kind of how you're seeing emissions and kind of different carbon reduction goals kind of start to make their way into tenders?

Yeah. So I think we would probably all agree that the pace of the recovery that we've seen in the drillship side of things has probably exceeded everybody's expectations, which is great. And certainly, when we see the really high level of utilization above 90%, and for the real high spec rigs, we're essentially at 100% utilization at the moment. The question then turns to things, as you said, like emissions. So it's true that it's widely touted that Gulf of Mexico provides a particularly efficient carbon footprint per barrel. And that's one of the reasons that our customers invest in that particular basin, but also because the breakevens are particularly good and the size of the developments are profound. So it's a very constructive business environment in the U.S. Gulf. In terms of specific technologies, as you will have heard us say various conferences and what have you. We do have several initiatives around reducing carbon footprint as far as you possibly can, doing so in a safe manner. So I'm not throwing caution to the wind, but certainly exploring always that we can reduce fuel consumption and also produce lower emissions per liter of fuel consumed. So we do have several initiatives out there. We've -- everything from fuel additives to how we manage our power plants. But we kind of engage with the customers on an individual basis on those kind of things. The reason being that a lot of them involve capital investment, they involve upgrades. So it's certainly something that benefits everybody. But from our point of view, we are looking for a partnership on that investment before we push forward whole scale on that, simply because the investment has a return period on it that we need to see reasonably long contracts to justify that kind of upgrade. But it's a hot topic, just now for sure. Many of the operators engage with us regularly on that. And we've got several more initiatives that you'll see come out over the coming years.

Thanks. I’ll leave it there.

[Operator Instructions] We will take our next question from Karl Blunden with Goldman Sachs. Please go ahead.

Hi, good morning. Thanks very much for the time. Roddie made some comments about a very strong outlook for 2023 and - or second half of '23 and '24 in Norway. I'd just be interested in any color you can provide on how you see contract rates and also length evolving through the first half of '23? And the reason I asked that is you do have some bonds that are coming due in '23-'24 that are currently backed by contracts. And I'm trying to figure out what the right base case assumption should be in terms of how you refinance or address those? Could that be done backed by contracts again? Or is another approach more feasible?

I'll answer the market part of the question. And then I'll kick it over to Mark for the financing piece of it. In terms of the market, so there's already a couple of tenders out there that are looking at much longer-term. So it's true that as the harsh environment has recovered over the past couple of years, there's kind of a mix between longer-term contracts and some shorter-term contracts. So as I mentioned before, that tax incentive is - really kicks in place this year. So you'll see the follow on in activity in ‘23 and into '24 for that one. But yeah, I think overall, that market looks quite well balanced at the moment and certainly looks to be very, very strong when you get into that '23-'24 time frame.

Yes, Karl. This is Mark. So as you know, each of those CAT-D rigs have four three-year options. So clearly, if those get exercised, the ability or the intention to guard and refinance the balloon payments over those periods would be priority number one. However, we have other options as well. And if you look at our five-year plan, we actually anticipate paying off that balloons, not refinancing them. So anything that we do with regard to refinancing against contract backlog wouldn't be a benefit to our liquidity forecast. But as I said, we have several things we're working on. I don't want to get into that right now, but just watch the space.

Fantastic. Maybe just one quick follow up on liquidity. The revolver you mentioned is due in the middle of next year. What is the right time frame for addressing that? Some folks would think sooner rather than later. But with the macro improving, how does that affect the right timing for looking to extend that?

Yeah, Karl. I think you got it spot on. We have been talking about the macro improvement now for a few years. The timing couldn't be better. So clearly, we're waiting to see a few more fixtures get posted to ensure that all markets, including the banks see that the market is improving. But you can expect us to start this process in the next few months and hopefully get it completed by the end of the year.

Thanks very much.

[Operator Instructions] And we will go next to Samantha Hoh with Evercore ISI.

Hey, guys. Thanks for taking my question. Jeremy, you had mentioned on the last call that you're being approached by customers to revisit the business model and maybe figure out different partnerships to survive both the downturn and upturn and clearly, we're in an upturn now. And with some of the pictures that you posted. I'm just kind of curious how those dialogues are going? And if you could actually share what type of arrangements are being discussed?

Yeah. I'll hand that one to Roddie because he's engaging in those conversations daily. But thanks for the question, Samantha.

Yeah, hi. Look, I mean as things improve, as you might imagine, the discussion changes is no longer about trying to find a spot for the rigs and whether we'll be able to keep them busy. The discussion for the future is now about what the economics look like. So we are heavily engaged in discussions around value proposition. So that's not just the day rate. So yes, you've seen a really big increase in day rates comparatively speaking over the past 12 months, but we also see a lot more kind of value discussions around how is compensation linked to performance. So we've done a fantastic job, but hats off to fuel and the operations team for delivering first class performance not only results in really good revenue efficiency, but also our bonus capture opportunity. So we're in the tens of millions of bonus capture per year. So that’s something we probably would never have said in years past, but I do remember the debate some years ago where its folks weren't really embracing that. I think Transocean embraced that wholesale. And we have a number of contracts that we've done particularly well in that. So there's definitely that performance linked compensation element. In addition to that, in terms of like long-term partnerships, we do have partnerships with several of the operators that last for many years very virtual contracts. But we're in constant dialogue with them on how to essentially enhance our service delivery, how to meet more of their goals. And similar to one of the previous questions around ESG initiatives and reduced carbon footprint -- those kind of discussions take place part and parcel with performance with long-term contracts and investment in the rigs.

Yeah. And I'll just add to that, Samantha, that it's not just about the rates or the structure, the economic structure, it's really around rig availability. Our now recognize that the availability of active high specification assets is rare. And supply is tight and the cost -- not only the cost, but the time to reactivate a rig or bring out a newbuild because of the supply chain challenges we're facing around the world due to COVID is really a problem for them. And so the partnerships are both around what does the business model look like going forward and how do I access to the best rigs that are currently available and hot.

Okay. What are some of the sort of leading technologies that operators are looking for now if the conversation is to actually reactivate the rig? I think like for example, you mentioned managed pressure drilling is kind of -- they're seeing more and more of that in some rig tenders but beyond just like the low emission technologies and whatnot? Like what other sort of technologies do you see customers looking for in rate these days?

Yeah. So other than the ones that you mentioned, we're heavily engaged in performance related technologies. So for example, ADT but also more and more drilling automation. If you're an avid follower of a LinkedIn page, you would have seen we just posted the robotic riser bolting system, which is the first robots to be brought to a drill floor. A very interesting technology because it provides a far safer drill floor operation, relatively speaking to the traditional means, but also provides time savings that's a benefit to the customer's well program. So yeah, we have a list of these things. We probably have about 10 key technologies that we're currently discussing with customers. We kind of have a package of presentation of all these different techs that we take to the various drilling departments around the world. But the uptake was slow during the downturn, but we've seen a marked increase in number of technologies that are being deployed on the rigs and pilots that are kicking off. So we're pretty encouraged to see that our customers are now finally getting into that kind of investment.

Yeah. And I think the key for us has always been -- has been on technologies that can improve safety reliability, uptime and efficiency, both drilling efficiency and improving our environmental footprint. And so those have been the technologies we continue to invest in despite the downturn. And I'm proud that we have, and we've continued to develop those and even deploy some. And now we're getting to the stage where the customers actually willing to pit for it. And so that's the encouraging piece. And so if we can get the customers to actually pay for these technologies, when they see the value in them, then we can deploy more quickly. Right now, it's been a very measured deployment just because of a lack of capital.

That's wonderful. Thanks, guys. I’ll definitely take a look at, but that price bolting system on know your LinkedIn page.

We will take our next question from Aaron Rosenthal with JPMorgan. Please go ahead.

Hey, good morning. Thanks for taking my question. Just wanted to quickly follow up on the liquidity number detailed earlier. I think I heard about $1.5 billion at June 2023. If that's correct, I just kind of want to verify the prior year-end '22 look great to about $1.9 billion was impact maybe you can kind of help us bridge from that figure during the interim six months to the $1.5 billion in June?

Sorry, Aaron, you're very garbled. I cannot hear you. I think you asked to liquidity in mid-2023 and the range I gave was $1.4 billion to $1.6 billion, including our $1.3 billion revolving credit facility, which matures on that date.

Sorry, guys. You weren't able to hear me. Was the $1.4 billion to $1.6 billion in June of 2022 or 2023?

'23.

Okay. And then the prior year-end 2022 liquidity figure of between $1.8 billion and $2 billion, is that still in place?

Yes, it is. And obviously the reason why we're giving a specific date in '23 because that's the day that the revolver matures. Obviously, prior to that time, we will have either replaced it or extended it. So we'll have a better number for you once that exercise is complete.

Yeah, understood there. And then I guess in the -- from year-end '22 to call it June of 2023, at the midpoint that's about $400 million or so of liquidity falling. Can you just kind of elaborate on the bridge there? I guess you kind of laid out an initial CapEx number. But if you could just give us some incremental color would be appreciated.

Yeah. The vast majority of that is debt repayments. If you recall the previous question we had on the CAT-Ds, we have one of the two CAT-D bonds maturing in that time period. So we're paying that off during the first several months.

Okay. Perfect. Thank you very much. And then just one more. I guess on the 1Q '22 guide. I guess can you just elaborate further on the moving pieces there with respect to I guess both downtime and perhaps in the Gulf of Mexico as well as some of the guided OpEx figures.

You're asking about Q1 of 2022?

Yes, sir.

So the biggest change there is the fact that we've had two of our high day rate rigs, which were long-term contracts that cures and the Conqueror roll off to lower day rate contracts. That's about $13 million. You also have two less days in the first quarter because of February being 28 days. So that's another $12 million. And we're also forecasting less reimbursables for the first quarter versus the fourth quarter, and that's about $7 million. But as you know, that can fluctuate based upon what will we get asked to buy customers during the quarter. But those are the three components that drive the difference.

Perfect. Thank you.

Thank you.

This will conclude today's question-and-answer session. I would now like to turn the call back over to Cale Dillingham for any additional or closing remarks.

Thank you, Cynthia. And thank you, everyone, for your participation on today's call. We look forward to talking with you again when we report our first quarter 2022 results. Have a good day.

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