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DATE
Tuesday, Aug. 5, 2025 at 1 p.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Keelan Adamson
Executive Vice President and Chief Financial Officer — Thaddeus Vayda
Executive Vice President and Chief Commercial Officer — Roddie Mackenzie
Vice President of Investor Relations — Alison Johnson
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TAKEAWAYS
Contract Drilling Revenues-- $988 million for fiscal Q2 2025 (period ended June 30, 2025) at an average daily revenue of approximately $459,000, matching company guidance for the period.
Operating and Maintenance Expense-- $599 million operating and maintenance expense, below guidance due to lower in-service maintenance and reduced out-of-service project costs on Transocean Endurance and Deepwater Invictus.
General and Administrative Expense-- $49 million, in line with internal expectations.
Total Liquidity-- Approximately $1.3 billion in total liquidity as of fiscal Q2 2025, comprised of $377 million in unrestricted cash, $395 million in restricted cash primarily for debt service, and $510 million of undrawn credit facility.
Industry-Leading Backlog-- Backlog of approximately $7 billion, reflecting sustained high fleet utilization and premium day rates.
Cost Reductions-- Company reiterated on-track delivery of $100 million sustainable annual cash cost savings for both 2025 and 2026, with an additional $50 million in annual shore-based operating cost savings expected beginning in 2026.
Debt Reduction-- Management affirmed it remains on track to reduce debt by more than $700 million in 2025.
Fiscal Q3 2025 Guidance: Contract Drilling Revenues-- Expected contract drilling revenues between $1 billion and $1.02 billion for fiscal Q3 2025, based on 96.5% revenue efficiency and $60 million-$70 million in additional services and reimbursables.
Fiscal Q3 2025 Guidance: O&M Expense-- Anticipated between $600 million and $620 million, with a minor quarter-over-quarter rise due to in-service maintenance timing.
Fiscal Q3 2025 Guidance: G&A Expense-- Forecasted in the $50 million-$55 million range.
Fiscal Q3 2025 Guidance: Net Cash Interest Expense-- Expected to be around $136 million, with gross interest expense of $143 million and interest income of $7 million.
Fiscal Q3 2025 Guidance: Capital Expenditures and Cash Taxes-- CapEx is expected to be in the $25 million-$30 million range, and cash taxes of approximately $16 million.
Fiscal Year 2025: Contract Drilling Revenues-- Now expected between $3.9 billion and $3.95 billion in contract drilling revenues for fiscal year 2025, including $255 million-$265 million in additional services and reimbursables.
Fiscal Year 2025: O&M Expense-- Guiding to $2.375 billion-$2.425 billion in operating and maintenance expense, mainly higher due to increased reimbursables and foreign exchange, but offset by revenue increases.
Fiscal Year 2025: G&A Costs-- Up slightly due to performance-related accruals.
Fiscal Year 2025: Net Cash Interest Expense-- Estimated net cash interest expense between $540 million and $545 million for fiscal year 2025, with gross interest expense of $575 million and interest income of $30 million-$35 million.
Fiscal Year 2025: Cash Taxes and CapEx-- Cash taxes expected at $70 million-$75 million, and capital expenditures are expected to be approximately $120 million (of which $55 million is customer upgrades fully reimbursed, $65 million is sustaining CapEx).
Year-End Liquidity Forecast-- Expected liquidity at year-end 2025 between $1.45 billion and $1.55 billion, inclusive of cost savings programs and $440 million in restricted cash.
Bond Exchange-- As of late June, $157 million principal amount of 4% senior exchangeable bonds due December was exchanged for 59.4 million shares, leaving approximately $77 million in aggregate principal amount of the bond outstanding.
Fleet Rationalization-- Four lower-spec rigs were removed from the fleet, with management indicating additional attrition may be likely industry-wide.
Contract Extensions and Awards-- Transocean Spitsbergen secured a two-well option at $395,000/day through August 2027, Deepwater Mykonos received a 60-day extension in Brazil with further options, and Deepwater Skiros received a three-well Ivory Coast award with a one-well option extending into fiscal Q2 next year if exercised.
Utilization and Day Rate Trends-- Company expects active ultra-deepwater fleet utilization to approach 90% by late 2026 to early 2027, which could drive upward pressure on day rates.
Deepwater and Ultra-Deepwater CapEx Expectations-- Citing Wood Mackenzie, global development CapEx for deepwater is forecasted to rise from $64 billion in 2025 to $79 billion in 2027, a 23% increase (calendar year basis per source language; GAAP/non-GAAP designation not specified).
Regional Demand Developments-- Projected incremental rig demand in Africa, the Mediterranean, and Asia, including multiyear Mozambique tenders in 2027 and Chevron Gorgon in Australia, plus possible additional drillships in India and growth in Asia Pacific.
Harsh Environment Activity-- All four of the company's Norwegian harsh environment rigs are fully committed into 2027; UK sector and Orange Basin also cited as active development areas.
Shareholder Distributions-- CFO Thaddeus Vayda confirmed the objective remains to reach 3.5x net debt to EBITDA, with late 2026 still the estimated timeframe at which distributions could be considered.
Deep-Sea Mining JV-- The Olympia vessel remains in a JV for deep-sea minerals, with additional Transocean rigs potentially involved if commercial activity accelerates; the company is focusing on core offshore drilling amid regulatory developments.
Tariffs-- Management stated that "we currently do not expect the impact of either direct or indirect tariffs to be material," and thus no tariff impacts are included in guidance.
SUMMARY
Thaddeus Vayda highlighted a bond exchange in late June 2025 that converted $157 million of 4% senior exchangeable bonds to equity, decreasing outstanding principal to $77 million and resulting in 59.4 million new shares issued. Keelan Adamson discussed structural supply reductions, confirming the removal of four lower-spec rigs and suggesting continued attrition among global industry players to improve market balance. Roddie Mackenzie indicated the bottom of the utilization dip is near, with day rates expected to rebound as fleet utilization moves from the mid-80% range into the low 90% range, as projected for late 2026 and early 2027. The company anticipates tightened global rig markets by late 2026, citing strong customer inquiry pipelines and an acceleration in FID activity after recent commodity price volatility. Management described multiple forthcoming tenders in emerging regions and pointed to exploration-driven incremental demand, especially in Africa, the Mediterranean, and Asia.
When asked about potential asset disposals, Thaddeus Vayda clarified, generally speaking, when rigs go to recycling, it's about a cash breakeven type of transaction—so in the ballpark of probably $8 million to $12 million per asset.
CFO Thaddeus Vayda confirmed that no assumptions beyond breakeven proceeds are included in current liquidity forecasts related to rig disposals.
During Q&A, Keelan Adamson stated, "we're very focused on the core business and maximizing our opportunities in that," reinforcing deep-sea mining will not distract from main offshore drilling operations.
Management clarified that liquidity estimates assume convertible instruments are equitized at maturity, with further options to be considered if valuation does not improve.
Roddie Mackenzie described current market conditions: "we may have seen a 10-15% drop in rates over the last couple of quarters, but already we see some more solid rates that are expected to come out as that 2027 time frame gets super busy."
INDUSTRY GLOSSARY
Ultra-Deepwater: Offshore drilling operations and equipment designed for water depths typically exceeding 7,500 feet.
SPS (Special Periodic Survey): A regulatory inspection and maintenance event required at regular intervals (typically 5, 10, or 15 years) to ensure rig safety and compliance.
Day Rate: The agreed daily fee paid by operators for contract drilling rig services, exclusive of reimbursable costs.
FID (Final Investment Decision): The point at which a project’s key sponsors make a binding commitment to finance and execute a development.
Backlog: The total future revenue contractually secured from signed drilling service agreements, yet to be earned.
Full Conference Call Transcript
Keelan Adamson, President and Chief Executive Officer; Thaddeus Vayda, Executive Vice President and Chief Financial Officer; and Roddie Mackenzie, Executive Vice President and Chief Commercial Officer. During the course of this call, Transocean Ltd. 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 Keelan and Thad'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, please limit yourself to one initial question and one follow-up. Thank you very much. I'll now turn the call over to Keelan.
Keelan Adamson: Thanks, Alison, and welcome, everyone, to our second quarter conference call. As always, we greatly appreciate your interest in Transocean Ltd. I want to open today's call by sharing a few of Transocean Ltd.'s key priorities. We are intently focused on several interrelated objectives with outcomes that are entirely within our control, and we are addressing them with urgency and agility. First and foundational for everything we do is delivering best-in-class services for our customers. Transocean Ltd. is the partner of choice for operators requiring expertise in the most technically challenging ultra-deepwater and harsh environment regions of the world. We are committed to providing the safest, most reliable, and efficient operations everywhere, all the time.
Next, we will continue to manage our portfolio of high-spec rigs in a disciplined and selective manner, endeavoring to extract the greatest value possible from our unique fleet. Lastly, but also of paramount importance, we will continue to improve our overall financial flexibility. To do this, we will achieve and maintain the most efficient cost structure possible. We will reduce total debt as rapidly as we can, minimize interest expense, and ultimately simplify our balance sheet. Transocean Ltd. is differentiated from the competition by both its people and its assets. Our customers trust us to deliver in the world's most technically demanding environments.
Operators select Transocean Ltd. because of the exceptional synergies created by our people and our assets, leveraging our technology and innovations to drive consistently high performance. This powerful combination is our value proposition, differentiating our product for both customers and investors. We take exceptional pride in being the preferred offshore drilling provider and being recognized for delivering the highest quality and most efficient solutions. Just last week, Beacon Offshore Energy announced it commenced production from the Shenandoah field, which was drilled by one of our two eighth-generation 20,000 PSI drillships, the Deepwater Atlas. This is the second 20,000 PSI reservoir to come online using Transocean Ltd.'s ships.
We are excited to be part of this achievement and thank Beacon for placing its trust in Transocean Ltd. to accomplish this important milestone. Our high-specification ultra-deepwater and harsh environment fleet is unmatched, attracting an industry-leading backlog of approximately $7 billion. Under all market conditions, our fleet has maintained higher average utilization and premium day rates. We believe that we have a very effective and successful commercial strategy. We are continually evaluating market dynamics from a supply and demand perspective, carefully assessing individual opportunities to ensure we are deploying each asset into the right project at the right time.
You should expect us to continue to be disciplined and strategic in applying this portfolio approach to the management of our fleet to maximize EBITDA and cash flow. Regarding our efforts to improve our financial flexibility, recall that last quarter, we announced a plan to sustainably reduce our cash costs by about $100 million in each of 2025 and 2026. This reduction is primarily from our fleet operating and maintenance expense, and we are on track to deliver these savings. As should be the case, we strive for continuous improvement.
Accordingly, we have taken additional steps to improve the efficiency of our shore-based organization and expect to reduce these costs by approximately $50 million on an annual basis beginning in 2026. Importantly, these actions will not in any way compromise safety, customer service, or the reliability of our rigs. We understand the importance of financial resilience to effectively weather the inevitable cycles in this business and generate appropriate returns for our shareholders. We have a clear path to delever significantly over the next few years, addressing our debt obligations by efficiently converting our industry-leading backlog to revenue and maximizing cash flow to equity. We remain on track to reduce debt by more than $700 million this year.
We will continue to take a disciplined approach to managing our balance sheet, carefully assessing how each action fits into our long-term financial strategy. Moving now to our outlook for the global market. With an active fleet mostly contracted through the middle of next year, we are actively working on opportunities for 2026. While the pace of contracting activity has been measured since the middle of last year, all projections suggest we are nearing the end of this temporary slowdown.
Indeed, we are engaged in multiple conversations with customers on attractive opportunities for work well into the future and have a line of sight to a number of forthcoming tenders, which I will discuss after a brief recap of our recent fixtures. In June, we issued a press release disclosing that a two-well option was exercised on the Transocean Spitsbergen. The option, which was struck at a rate of $395,000 per day, ensures the rig has continuous work through August 2027. Next, in Brazil, the Deepwater Mykonos was awarded a 60-day contract extension. The agreement also includes multiple options, which, if exercised, would keep the rig working into next year.
Finally, in the Ivory Coast, Murphy awarded the Deepwater Skiros a three-well contract. The program is expected to commence late this year and includes a one-well option that, if exercised, would keep the rig working into the second quarter of next year. We continue to expect the market to tighten by late 2026 and into early 2027, at which point we expect the global active ultra-deepwater fleet will once again approach utilization exceeding 90%. This should result in upward pressure on day rates. Third-party analyst data supports our view. Wood Mackenzie's latest analysis shows deepwater and ultra-deepwater development CapEx rising from $64 billion in 2025 to $79 billion in 2027, a 23% increase.
In their latest commentary, both Fernley's Offshore and Westwood Global Energy Group noted that commencement dates for pent-up demand have firmed up and, for the most part, stopped sliding to the right. For the ultra-deepwater drillship market, the primary source of incremental demand is still expected to come from Africa, the Mediterranean Sea, and Asia. If known programs materialize as currently projected, there could be an incremental four drillships working in Africa in 2027 and an additional two in the Mediterranean. We are optimistic that commencement windows for these programs will continue to remain generally stable as many of them are progressing through the tender process.
For example, of the three multiyear opportunities set to commence in Mozambique in 2027, one has been released, one is in the RFI stage, and one is pending release, which is expected by September. Moving east to the Asia Pacific region, current tenders indicate up to four incremental drillships will be required in the next two years, including the Chevron Gorgon prospect in Australia, which is expected to commence in 2027. This will be the first time in seven years a drillship has operated in-country. Demand in India also points to one additional drillship as ONGC, Reliance, and Cairn each have programs in this time frame.
Finally, tenders for the remainder of Asia will likely require the rig count to move up from three active drillships today to five in 2027. Activity levels in the US Gulf, Latin America, and Brazil are expected to remain relatively stable. Since our first quarter 2025 earnings call, bids were submitted for Petrobras' enthusiast program, and Petrobras released the tender for its MERO project, which has a firm duration of nearly four years, expected to commence in 2027 for at least one rig. With respect to the previously mentioned Buzios tender, it is possible that four rigs could now be awarded rather than up to the three originally anticipated.
Additionally, Shell is currently evaluating bids for the Gallo De Mata development, and Equinor released an RFI for a one-year program with commencement likely in 2026. Furthermore, just this week, BP announced their biggest discovery in 25 years at the Boomerang block in the Santos Basin and indicated its intention to perform additional appraisal activities. The projected demand for harsh environment semisubmersibles remains strong in Norway and elsewhere internationally. As a reminder, our four rigs in Norway—the Transocean Spitsbergen, Transocean Norge, Transocean Encourage, and Transocean Enabler—are fully committed into 2027.
In the UK, on top of BP West Of Shetland, Itaka is also looking for one rig for its Campbell development, a 900-day program that starts in the same time frame. In the Orange Basin, meaning Namibia and South Africa, operators will soon begin the development phases of their discoveries, which will require at least one additional harsh environment semisubmersible. We expect a tighter global market to develop in the next two years. However, at this time, we do not see a compelling case for reactivations of cold-stacked units. Hence, our decision in the second quarter to remove four lower-spec rigs from our fleet.
We continuously assess the option value of our cold-stacked rigs to ensure we maintain the best and most competitive fleet to meet our customers' requirements. All else being equal, supply rationalization structurally improves industry dynamics. Including four of our own, a total of 11 rigs have been retired from the global fleet this year, and we believe it is reasonable to expect additional attrition in the near term. Industry consolidation could help facilitate further reduction in rig supply, which would contribute to a more balanced industry. With that, I will now hand it over to Thad to discuss our results and guidance. Thad?
Thaddeus Vayda: Thank you, Keelan, and good day to everyone. During today's call, I will briefly recap our second quarter results, provide guidance for the third quarter, and conclude with an update of our expectations for the full year. During the second quarter, we delivered contract drilling revenues of $988 million, in line with our guidance, at an average daily revenue of approximately $459,000. At $599 million, our operating and maintenance expense in the second quarter was below our guidance, primarily due to lower costs resulting from delays in-service maintenance across the fleet and lower-than-expected costs for out-of-service projects on Transocean Endurance and Deepwater Invictus.
G&A expense in the second quarter was $49 million, again in line with our expectations, and we ended the quarter with total liquidity of approximately $1.3 billion. This includes unrestricted cash and cash equivalents of $377 million, $395 million of restricted cash, the majority of which is reserved for debt service, and $510 million of liquidity from our undrawn credit facility. I'll now provide guidance ranges for the third quarter and an update on our expectations for the full year. For the third quarter, we expect contract drilling revenues to be between $1 billion and $1.02 billion, based upon an average fleet-wide revenue efficiency of 96.5% on our working rigs.
As you know, revenue efficiency is affected by uptime performance, weather, and other factors. This revenue estimate also includes between $60 million and $70 million of additional services and reimbursable expenses, which tend to carry low single-digit margins. The expected sequential increase in contract drilling revenues is primarily due to additional in-service days for the Transocean Spitsbergen as it completed its fifteen-year SPS in June, and one additional calendar day in the third quarter. These are partially offset by lower projected activity for the Deepwater Skiros and Deepwater Conqueror in the period. We expect third-quarter O&M expense to be within a range of $600 million to $620 million.
This slight quarter-over-quarter increase is primarily due to the timing of in-service maintenance across the fleet, partially offset by the completion of Transocean Spitsbergen's fifteen-year SPS in the second quarter. We expect G&A expense for the third quarter to fall within a range of $50 million to $55 million. Net cash interest expense for the third quarter is forecasted to be approximately $136 million, comprising interest expense and interest income of about $143 million and approximately $7 million, respectively. Capital expenditures for the third quarter are expected to fall between $25 million and $30 million, and cash taxes to be paid are expected to be approximately $16 million.
For the full year 2025, contract drilling revenues are now expected to fall between $3.9 billion and $3.95 billion, primarily reflecting potential variances in revenue efficiency. Our guidance also includes between $255 million and $265 million of additional services and reimbursable expenses. We expect our full-year O&M expense to be between $2.375 billion and $2.425 billion. This is somewhat higher than our previous guidance, primarily due to increased reimbursables and the effects of foreign exchange. Both of these expenses are offset by increases in revenue. G&A costs in 2025 are expected to be between $190 million and $200 million, slightly higher than previously forecast, primarily due to certain performance-related accruals.
For the full year, we are anticipating net cash interest expense between $540 million and $545 million, comprising interest expense and interest income of about $575 million and between $30 million and $35 million, respectively. This excludes any impact from the bifurcated exchange feature of our 2029 exchangeable bonds. Cash taxes for the full year are forecasted to be between $70 million and $75 million. We now expect 2025 capital expenditures to be approximately $120 million, slightly above our prior guidance due to customer upgrades that are fully reimbursed. Of this, approximately $55 million is related to customer-acquired capital upgrades for upcoming projects and capital spares, and approximately $65 million of sustaining capital investment.
Our liquidity at year-end is forecasted to be between $1.45 billion and $1.55 billion, consistent with my prior guidance. This reflects our revenue, cost, and capital expenditure expectations and includes the impact of our cost savings initiative, our undrawn revolving credit facility, and restricted cash of approximately $440 million. In late June, we announced we had entered into separate agreements with certain holders of our 4% senior exchangeable bonds due in December to exchange an aggregate principal amount of $157 million. Upon completion of these transactions, 59.4 million shares were issued. Approximately $77 million in aggregate principal amount of the bond remains outstanding.
Our liquidity forecast currently assumes convertible instruments are equitized at maturity, but as the remaining 25 EVs are out of the money, we will evaluate the various options available to us to address this. With respect to tariffs, we continue to monitor this fluid situation and have not included any potential impact on our guidance because we currently do not expect the impact of either direct or indirect tariffs to be material. This concludes my prepared remarks, and I'll now turn the call back to Keelan for his final comments before we begin Q&A.
Keelan Adamson: Thanks, Thad. Before opening up the line for questions, I want to reiterate that we are focused on addressing several key priorities with urgency and agility. Our team is committed to best-in-class services for our customers. We worked hard to earn their trust, and we intend to keep it. Our asset portfolio is unrivaled. We will continue to take a long-term view on the market and remain disciplined as we consider future contract opportunities. As you can tell from today's comments, our outlook for late 2026 and beyond is very constructive. Lastly, we are strengthening our balance sheet and improving our capital structure.
We have high confidence in our ability to add to our backlog, and we intend to efficiently convert it into revenue, maximizing cash flow to reduce our debt as quickly as possible. In conclusion, we are deeply committed to delivering for our customers and shareholders. We have a strong team focused on executing a clear plan to create long-term value. Alison, please open the line for questions.
Alison Johnson: Thanks, Keelan. Stephanie? We are now ready to take questions. And as a reminder to the participants, please limit yourself to one initial question and one follow-up question.
Operator: Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, please press star 1 on your touch-tone phone now. You may remove yourself from the queue by pressing star 2. Again, that is star 1 to ask a question. Our first question will come from Eddie Kim with Barclays.
Eddie Kim: Hi, good morning. Just wanted to ask about your expectation on the trajectory of leading-edge day rates here. We've been in sort of the mid to high four hundreds for some time now, but have recently seen a moderation into the low four hundreds level. You provided a very constructive market outlook and mentioned in your prepared remarks that you do see utilization of drillships reaching 90% by, I think, late next year. So is it fair to say you expect leading-edge day rates to return back to that mid to high four hundredth level by the end of next year? Just curious about your thoughts on the trajectory there.
Keelan Adamson: Eddie, thanks for your question. As you know, we have a history of being very judicious in how we apply, select, and deploy our assets into whichever project. I think what you're seeing today is some of the white space that we all anticipated. It's no surprise to us that we were there, that some of those rates are probably a little bit lower than what we've seen in the past. I think what we're going to see going forward is that capacity being absorbed. The future projections for activity are very, very positive. We're going to see more of the active fleet being contracted.
As we move out into the end of this year and into 2026, we're going to see a lot more contracting activity and tendering activity for the out years of '26 and beyond. As it pertains to rates, I'll let Roddie express his view on where the rates we think will go right now.
Roddie Mackenzie: Hey, Eddie. Yeah, so just to follow up on Keelan's comments there. We think about the utilization, as you mentioned, we dip down a little bit here. We're actually expecting that the bottom of this V is practically speaking upon us. So we think that utilization is going to bottom out somewhere in the mid-eighties as a percentage, which is only for a relatively short period of time. I think if you look at all the projections and certainly a lot of the things that Keelan touched on, we would expect things to recover from there.
One of the things that we mentioned about day rates is not just being very disciplined on what we're bidding, but the overall economic package on these tenders that we are evaluating. We have a very robust process between our various groups, our engineering group, our operations group, and several other departments of the company. It's really important to us that we take the holistic view that we look at all of the expenses that are associated with these tenders. Typically, the bottom of the V is when the worst deals are made. We apologize for not making as many long-term deals right now.
We're much more focused on gap fillers at the moment, but certainly to drive long-term value for the company, we don't think now is the time to aggressively pursue long-term deals, especially those you've seen some recently announced that had a very significant amount of upgrades required. But rest assured, we'll remain disciplined in that regard and make sure that we're very aware of all of the expenses associated with the projects and upgrades. Maybe just to add to that, Eddie, as you rightly point out, utilization needs to bridge about the 90% mark, maybe a little below that, before we start seeing good pressure on day rates.
As we move through the year and the contracting continues, you should expect the rates to improve. Certainly, from our side, we'll be looking at it strategically from a term and location and a customer perspective to drive the best value that we can get from our unique fleet.
Eddie Kim: Got it. Thank you for that color. My follow-up is just on the Proteus and the Conqueror, two of your drillships that are currently in the Gulf of Mexico and set to come off contract kind of mid to late next year. We've seen a handful of multi-year contracts signed by your peers in the Gulf of Mexico recently. Just based on your outlook for that region to be kind of stable going forward, do you expect it's likely that those rigs will stay in the Gulf, or could they move elsewhere?
Keelan Adamson: I think Roddie's jumping at that one. Yes, we do expect them to stay in the Gulf of Mexico. We have customers who are quite interested in that class of asset, and we're pursuing a couple of different things at the moment. So we are cautiously optimistic that those rigs will be extended right where they are. Maybe just to add to that, Eddie, you're talking about two of our highest spec units in the fleet and in the world's industry. The Conqueror is right at the top, right behind our eighth-generation units, and the Proteus has obviously been performing really well for our customers.
Our crews, our operation from those rigs is stellar, and I'm sure there will be significant demand for those two assets.
Eddie Kim: Great. Thank you very much. I'll turn it back.
Operator: Thank you. Our next question will come from Doug Becker with Capital One.
Doug Becker: Thank you. Maybe a couple for Thad. Just curious about potential proceeds from some of the rigs that are slated for disposal. What are the assumptions embedded in the liquidity expectations that were laid out?
Thaddeus Vayda: Hey, Doug. We do have some nominal amount included in the liquidity forecast. I don't think we've disclosed the total amount for the rigs, but generally speaking, when rigs go to recycling, it's about a cash breakeven type of a transaction. So in the ballpark of probably $8 to $12 million per asset, generally speaking. Certainly, if we have an opportunity to transact and to dispose of those assets into alternative functions, those numbers could be higher. But we would announce that as and when that would happen.
Doug Becker: Got it. So don't assume anything beyond kind of breakeven at this point.
Thaddeus Vayda: That's correct.
Doug Becker: In the past, you've given us some color on when we might get to 3.5 times net debt to EBITDA. It's been an uncertain market. Just any update on those assumptions and certainly appreciate it's been.
Thaddeus Vayda: Yeah, no change. The objective is to achieve that metric as soon as possible so that we have the option to consider distributions to shareholders. Generally speaking, I think we're probably still in the late 2026 time frame for that.
Doug Becker: Fair enough. Thank you.
Operator: Thank you. Our next question will come from Greg Lewis with BTIG.
Greg Lewis: Yeah. Hi. Thank you, and good morning, and thanks for taking my question. I wanted to pivot a little bit about this. I'm kind of curious about your views. I want to go back a couple of years ago when you contributed the Olympia for deep-sea mining. Kind of curious, just given what we're reading in the news more lately over the last couple of months, where does that stand? Is that something that Transocean Ltd. is still involved in? And if so, maybe could you provide some updates around that?
Keelan Adamson: Yeah. Thanks, Greg. Yeah, we're obviously, as you picked up, the Olympia is still in that arrangement that we have. We're seeing a lot of press, as you are, on deep-sea minerals and potentially the US administration pushing to advance their agenda in that regard. I'll push it over to Roddie here. He's responsible in that area, and we'll answer your question.
Roddie Mackenzie: Yeah. So we continue to pursue our technical solutions for doing this kind of recovery. But, yeah, having that asset in the JV is very useful for us. It also gives us that optionality. But, you know, these things do take a little bit of time. We have to be honest about that. But we are excited to at least have that adjacency available to us. Should it take off, if it does, then there is the possibility of additional vessels going in there. Typically, there would be our kind of lower specification drilling rigs that are actually perfectly adequate and quite well specified for this kind of venture, should it take off at some point in the future.
Keelan Adamson: Yeah. I think, as Roddie indicated, obviously, it's a fairly elongated process, and it has to go through a lot of regulations. So when you look at our core business and you see what the drilling activity looks like it's projected to do in the next couple of years, we're very focused on the core business and maximizing our opportunities in that.
Greg Lewis: Okay. Great. Thank you for that. And then just realizing your fleet's very well contracted, but I guess there does seem to be, I mean, I guess it's not maybe a specific question to Transocean Ltd., but maybe about the market, is kind of indicative of maybe where we're headed. Could you maybe talk about, as you look out over the next two, three quarters, any things we're seeing in terms of spot activity? Are there certain pockets? Is there certain types of customers? Is it exploration? Just kind of if there are any kind of spot tenders or spot jobs you're tracking, what's kind of the makeup of those?
Roddie Mackenzie: Yeah. Sure. I'll take that one. Yeah. So there are a number of spot jobs, and you would have seen that we picked up a couple of them. Basically, we got an extension on one of the rigs in Brazil and also picked up the Murphy work in the Ivory Coast. As we look at that kind of stuff, there's been several in the Gulf of Mexico that are just kind of adding wells. Typically, when you have a mature basin that has a lot of prospects, a lot of developments there, there's often work that comes up to do remedial work on wells or stimulations to increase production.
So we have seen plenty of those happen over the past couple of years. We know that there are several others in places like West Africa, which in general is actually looking really positive at the moment. There are kind of four tenders coming up for Nigeria, or I think one of them has been awarded already, but Mozambique's got three, and the Ivory Coast's got two, and Ghana's got two. So there seems to be quite a lot of stuff there in terms of decent long-term activity. We are seeing a number of these kind of six-month opportunities just like the one we just signed that pop up in places like that.
So it makes a lot of sense for rigs that either have those longer-term contracts available to them or are kind of rolling off hot rigs at that time frame. Then it's a kind of a win-win between the contractors and the operators. Pick up an operational hot rig that's doing well and punch out a few wells.
Greg Lewis: Thank you very much.
Keelan Adamson: Thank you.
Operator: We will take our final question from Noel Parks with Tuohy Brothers.
Noel Parks: Hi. Good morning. You know, I was just thinking about compared with where things stood heading into 2024 when we had such bullishness around prices and hitting new hurdles on the upside for day rates. And where we are now, where you see good visibility to 2026 being hopefully the wrap-up of this slowdown. With the benefit of hindsight, would you say this slower couple or three quarters is more typical of a service, you know, driller business cycle? Just curious about your thoughts on that.
Keelan Adamson: I don't think it's conventional cyclical activity in our business. I mean, you have to look at the rates and what was set, and we're nowhere near those rates that we saw in the pandemic period or even before then. The rates are very, very solid, albeit a little less than what we saw in the last couple of years, and that's simply because we have a little white space. There's some rigs rolling off. There's opportunity based on volatility in the market space, whether it's related to tariffs or related to OPEC or related to oil production and need. So no, not at all. I think, as a reminder, the deepwater game is a long play.
The reserves are big. The investment is large. And the lead times for the work and approval processes are quite extensive. The projections are all pointing towards our operators. Our customers are starting to get back into the FID process. They look at it based on oil price and what the world's demand for hydrocarbons looks like. All of those are positive indicators for continued constructive growth right now. Roddie, do you have anything?
Roddie Mackenzie: Yeah. I think I'd just add to that to see the amount of turmoil and shock in the commodity price these days. It's a relatively simple decision to push out noncritical investments another quarter, another two quarters just to wait and see what happens. But the one thing that does is it kind of adds to that pent-up demand. So it kind of puts you in an interesting spot because you have the possibility of a number of the rigs that have white space ahead of them, particularly at the lower specification, then there's a real chance there that those rigs may be retired.
I think one of the effects you're going to see is rather than the drilling contractors spending a tremendous amount of money on assets that they're trying to bridge a significant period of time, they're far more likely to pull those off the market, retire those rigs, which ultimately is going to help the supply and demand balance there when we do get a busier time. But I would say, actually, we're looking at the number of tenders that we're answering, and we've had our competitors say the same thing. There really is a tremendous amount of potential out there.
So, again, we reiterate that probably a few bargains to be had in the short term, but for long-term work, it makes all sense in the world that the day rates will be solid going forward. Can't really see how that would degrade materially. And to Keelan's point, we may have seen a 10-15% drop in rates over the last couple of quarters, but already we see some more solid rates that are expected to come out as that 2027 time frame gets super busy. Expect to see the pickup beginning late 2026. I think you'll see a lot of those tenders answered and announced in late 2025.
Noel Parks: Terrific. Thanks a lot.
Roddie Mackenzie: And, you know, I'm just wondering with the, you know, we've been seeing these, I don't know if you call them green shoots of greater exploration activity happening across the industry. And you did touch on exploration briefly a bit earlier. But I was wondering with the BP Boomerang find, anything you see as sort of unusual or intriguing about that project? And I wondered if, other than the general trend of, hopefully, exploration picking up, do you see any implications from that success for either industry activity, CapEx levels?
Keelan Adamson: Yeah. For sure. I mean, if you think about just take the Boomerang discovery. So it's a big discovery, obviously. You'll be pacing it's the largest in 25 years. That's a really interesting position that you find Brazil in now. So Petrobras, as you know, is out to tender on several different things, and they've kind of picked up the pace on that. I think that's partially in response to how many opportunities there are with the IOCs. So that's a relatively new development in Brazil, but we're looking at tenders from Shell at the moment.
We're also expecting BP has some additional work that some of it is already been announced and some will probably come as a result of this latest discovery. As you know, we're currently in the throes of the Buzios tender, and the Nero tender is out now. I think what's interesting in that is the kind of the indications are that there could be maybe one extra rig than originally thought being used for the Buzios tender. And, of course, with the Equinor tender that's out now, that was kind of incremental demand as well. So you're kind of seeing these green shoots looking very interesting.
To your point about exploration, there is actually a reasonably good increase expected in exploration wells to be drilled in '26 and '27, about a 25% increase each year. So it appears that as the operators are really shifting their focus back to oil and gas, kind of retooling if you would to move into the profitable core business. We're certainly beginning to see those green shoots show up in these kinds of prospects. Having as are some of our other customers. And that only bodes well for absorbing capacity in the market. Whether it's in Brazil or Africa, or elsewhere around the world. So, yeah, we see it as a big positive.
Noel Parks: Great. Thanks a lot.
Operator: Thank you. This does conclude our question and answer session. I'd like to now turn it back to Alison Johnson for any additional or closing remarks.
Alison Johnson: Thank you, everyone, for your participation on today's call. We look forward to speaking with you again when we report our third quarter 2025 results. Have a good day.
Operator: Thank you, ladies and gentlemen. This does conclude the conference call.