Transocean Ltd. (NYSE:RIG) Q4 2025 Earnings Call Transcript

Transocean Ltd. (NYSE:RIG) Q4 2025 Earnings Call Transcript February 20, 2026

Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please standby. Your meeting is about to begin. Hello, and welcome everyone joining today’s Q4 2025 Transocean Ltd. Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to David Kiddington, Vice President and Treasurer. Please go ahead.

David Kiddington: Thank you, Nikki, and good morning, everyone. Welcome to Transocean Ltd.’s fourth quarter earnings call. Leading today’s call will be Transocean Ltd. President and CEO, Keelan I. Adamson. Keelan will be joined by other members of Transocean Ltd.’s executive management team, Chief Financial Officer R. Vayda, and Chief Commercial Officer Roderick J. Mackenzie. In addition to the comments that will be shared on today’s call, we would like to refer you to our earnings release and fleet status report filed yesterday that contain additional information, all of which is available on Transocean Ltd.’s website www.deepwater.com. Following our prepared comments, we will open the conference line for questions. Please limit your inquiries to one question and one follow-up as this will allow us to hear from more participants.

Before we begin, I would like to remind everyone that today’s call will include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially. With that, I will hand the call over to Transocean Ltd. CEO, Keelan I. Adamson.

Keelan I. Adamson: Thanks, David, and welcome, everyone, to our fourth quarter and year-end 2025 conference call. We appreciate your interest in Transocean Ltd. I will cover several topics today. First, I will recap our key accomplishments over the last year. Next, I will cover our 2026 priorities. Third, I will quickly recap the highlights of our recently announced definitive agreement to acquire Valaris and why we are excited about this transformational combination. And lastly, I will close out with some market updates from around the world. Let us get started. 2025 was an important year for Transocean Ltd. The company executed very well both operationally and financially. Yesterday, we reported our fourth quarter results including solid adjusted EBITDA of $385,000,000 and free cash flow of $321,000,000.

Year on year, our results improved significantly, with adjusted EBITDA of $1,370,000,000 up nearly 20% and a significant increase in free cash flow to $626,000,000. During the year, we materially strengthened the balance sheet, retiring about $1,300,000,000 in debt. We executed two key capital market transactions to delever and improve both our liquidity and the timing of our debt maturities. These actions and the additional debt payments made in 2025 reduced our annual interest expense by nearly $90,000,000, enhanced our financial flexibility, and increased the value of our equity, ultimately enabling the recently announced transaction with Valaris. We sustainably improved our cost structure by removing $100,000,000 in costs and are on track to decrease our costs by an additional $150,000,000 in 2026.

We took the difficult but necessary steps to rationalize shore-based support around the world, reduce G&A costs, and restructure the organization to drive efficiencies without adversely impacting our operational performance. Today, we are leaner, more efficient, and more profitable. The operational performance of our rigs and, more importantly, our people were superb. Once again, we demonstrated why Transocean Ltd. is an industry leader. We achieved record uptime performance just shy of 98%. We had zero operational integrity events and zero lost time incidents across our entire fleet. Our process and occupational safety performance was exceptional. We completed five major planned out-of-service projects on time and on budget, and we continued to rightsize and high-grade the technical capability of our fleet.

We recycled six rigs in 2025, with one more completed earlier this year. We entered 2026, Transocean Ltd.’s one hundredth anniversary year, with strong momentum across the business. Now let us review Transocean Ltd.’s key objectives. Our first priority is to optimize the value of our differentiated assets. Transocean Ltd., through our people and fleet, has unparalleled capabilities. We strive every day to deliver best-in-class performance, with the most experienced and proven team of professionals, maximizing the capabilities of our high-specification fleet. We have an exceptionally capable drillship fleet and a high-spec fleet of semisubmersibles capable of executing in the harshest environment. As the technology leader in the offshore rig business, we continually innovate to improve the safety, reliability, and efficiency of our operation.

Second, we are focused on generating industry-leading free cash flow. We have roughly $6,000,000,000 in backlog that will efficiently convert into cash, the key measure of value in our business. The more we generate, the faster we can reduce our leverage, which will materially benefit our shareholders. And third, as we continue to reduce our total debt, we will establish a stronger, more simplified capital structure that provides financial resilience and the ability to weather the cycles of this business. Moving now to our recently announced definitive agreement to acquire Valaris. We are incredibly excited about the capabilities of our combined business. As we head into what we anticipate will be a very constructive period for the offshore drilling business, we believe that this transaction is well timed and know it is perfectly aligned with all of our strategic priorities.

It positions us to be a leader, combining the best fleet with the best team, working diligently every day to provide our customers with the best, most disciplined execution in the industry. Our geographic footprint and customer base will expand. Wherever our customers go offshore to find and develop reserves, we will be able to provide a rig solution to fit their requirements from a broader, high-quality asset base. We have identified more than GBP 200,000,000 in cost synergies, on top of our ongoing cost reduction initiatives. Our pro forma combined backlog of nearly $11,000,000,000 and cash flow generating capability are expected to accelerate debt reduction, resulting in leverage of around 1.5x within twenty four months of closing. We strongly believe that this combination will enhance returns to shareholders and create an exceptional opportunity for investors desiring exposure to the offshore rig business.

We expect to close the transaction in 2026, and we look forward to sharing more information on our progress in the coming months. I will now provide a brief market update. While we had seen some near-term moderation in tendering activity, the underlying outlook for deepwater offshore drilling is strengthening. In fact, tendering activity is growing, with opportunities developing in most major basins. In this market environment, we expect deepwater utilization to move meaningfully higher, and to greater than 90% through 2027, setting the stage for an increasingly constructive business environment. Looking regionally, in the U.S. Gulf, long-term demand remains robust driven by the Paleogene plays and the new lease awards with improved fiscal terms.

Any apparent short-term softness will likely result in preferred assets repositioning to other increasingly active markets elsewhere. In Brazil, we expect rig activity to remain stable. Any reduction in Petrobras’ projected fleet count will be small and temporary, offset by increased demand from international operators. We anticipate that Petrobras will conclude its blend-and-extend renegotiations by the end of the quarter, which will add multiple years of backlog. Africa continues to exhibit considerable growth potential. We expect the region’s rig count to increase from roughly 15 today to at least 20 over the next year or two. In Mozambique, we anticipate three multiyear program awards from each of ENI, Exxon, and Total, all scheduled to start in 2027 and 2028.

In Nigeria, Shell has already awarded its two-year program, with additional awards expected shortly from Exxon and Chevron. In addition, Total is preparing to tender this quarter. Collectively, this implies four rig lines from 2027 onward. In Angola, activity remains solid, supported by anticipated and announced extensions for rigs currently operating with Azule, Total, and Exxon. We also understand Shell will reenter the basin for a material exploration program in 2027. In Namibia, we are now seeing the first results from recent exploration success, with Total launching a major tender for the Venus development: two rigs, three years each, beginning in early 2028. We also expect further development activity as operators assess their recent discoveries for commercial viability.

And in the Ivory Coast, we understand ENI is preparing to issue a one-rig tender for three years of work beginning in early 2027. In the Mediterranean, activity has returned to pre-COVID levels, driven by strong regional gas demand in Egypt, Israel, and Cyprus. Rig count is expected to increase to around eight units. In Israel, we expect two rig fixtures to support the recently sanctioned Chevron and Energean developments. In Egypt, Shell and BP will add new programs starting this year. And in Cyprus, ENI’s Kronos development is expected to begin drilling in early 2027. Moving now to Southeast Asia and primarily Indonesia, we anticipate incremental demand of three to four rigs between ENI, Harbour Energy, Mubadala, and INPEX. In India, momentum is building with the government’s objective to drill 50 deepwater wells per year going forward.

In addition to the recently awarded one incremental fixture in the region, ONGC have just issued a new tender for three drillships and two semisubmersibles with contract durations of four years each, beginning in 2027. In Australia, the deepwater Skiros will commence a minimum one-year development program in early 2027. We see stable activity from all our semisubmersible customers with programs currently out for tender by Woodside, Santos, and INPEX. In Norway, utilization of the high-specification harsh environment semisubmersible fleet will remain robust through 2028, supported by recent awards from Equinor and Aker BP. Other operators are also seeking high-spec harsh environment units for 2027 starts, which is expected to drive utilization of these units to nearly 100%.

In closing, tendering activity is increasing. Multiyear opportunities are now in the market, and visibility into 2027 and beyond continues to improve. As operators move ahead with new developments and meaningful exploration programs, we are well positioned to capitalize on improving demand. I will now hand the call over to Thad for some brief comments on the quarter and our guidance. Thad?

R. Vayda: Thank you, Keelan. And good day to everyone. Our performance during the fourth quarter and for the full year 2026 was very much in line with our expectations and the guidance ranges that we provided to you in November. In the fourth quarter, we generated contract drilling revenues of $1,040,000,000 at an average daily revenue of approximately $461,000, which is generally consistent with the average daily revenue achieved in the last several quarters. Operating and maintenance expense and G&A expense was $605,000,000 and $50,000,000 respectively. Adjusted EBITDA was $385,000,000, implying a very healthy margin of 37%. And cash flow from operations was approximately $349,000,000, a sequential increase of 42%. Free cash flow of $321,000,000 reflects $349,000,000 of operating cash flow net of $28,000,000 of capital expenditures.

Our free cash flow margin was notable at 31%. I highlight that this is the best quarterly free cash flow we have generated in several years. It is a direct result of excellent operational performance, execution on our cost savings initiative, lower cash interest expense, and effective management of our working capital. We ended the fourth quarter with total liquidity of approximately $1,500,000,000. This includes unrestricted cash and cash equivalents of $620,000,000, about $377,000,000 of restricted cash, and $510,000,000 of capacity from our undrawn credit facility. In addition to now issuing our fleet status report concurrently with our quarterly results, we have slightly changed the presentation and content of our press release. Going forward, in addition to some format and tabular modifications, the release will include our guidance ranges.

This report provides guidance for the first quarter and full year 2026 for Transocean Ltd. on a stand-alone basis, as will be the case until the Valaris transaction closes, expected later this year. The guidance ranges provided include the effects of our cost reduction initiatives and reflect slightly lower levels of activity versus 2025, specifically assuming some idle time on several rigs, including the KG2, the Deepwater Proteus, and the Deepwater Skiros. I note that the potential to achieve the upper regions of the revenue guidance range relates mostly to these rigs being extended beyond their contract end dates or commencing new contracts earlier than anticipated. Even with the assumed idle time on these rigs, we expect free cash flow to be in line with or better than that achieved in 2025 as we continue to reduce cost and interest expense and make additional improvements in the management of our working capital.

We also intend to continue to utilize our free cash flow to opportunistically reduce debt in excess of our remaining 2026 scheduled obligation of approximately $380,000,000, which includes capital lease payments. This reflects about $130,000,000 in payments we have already made in 2026. Additionally, our stronger credit profile and improved cash flow generation may enable us to refinance some debt instruments at lower interest rates. Finally, we expect to end 2026 with liquidity of between $1,600,000,000 and $1,700,000,000, which excludes the effect of any incremental opportunistic deleveraging. That concludes my prepared remarks. Operator, we are ready to take questions.

Q&A Session

Operator: Thank you. And if you would like to ask a question, please press 1 on your keypad. To leave the queue at any time, press 2. We ask that you please limit yourself to one question and one follow-up. Once again, that is star and 1 to ask a question. Our first question from Gregory Robert Lewis with BTIG. Please go ahead. Your line is open.

Gregory Robert Lewis: Yes. Hi. Thank you, and good morning. You know, Keelan, I guess at this point, the market has definitely had some time to digest the acquisition of Valaris, and congrats on that again. And while it was definitely transformational to the balance sheet, you know, Transocean Ltd. was already the second largest owner of high-spec ultra-deepwater rigs prior to acquiring Valaris. Yeah. I guess I would be curious, post the acquisition, does this change the chartering strategy at all? And really, what advantages could the company benefit from just simply from these new potential economies of scale?

Keelan I. Adamson: Greg, and thanks for the question. As we think about consolidation and what it means for our industry and the upstream industry in general, and our customers have been consolidating, as you know, over the last few years, it is really driven around driving efficiencies into our business. It is about taking cost out of the chain and looking to provide a better service to our customers and to the consumers. So from our perspective, this combination allows us to address unnecessary cost across the combination. It allows us to ensure that our overlap of cost structure is minimized. We drive efficiencies into that structure. But, more importantly, we are starting to look at how do we improve our service provision as a combination across the world, to all of our customers.

And, ultimately, when I talk to our customers, they always are focused on project execution. In a capital-disciplined world where they only have a certain amount of CapEx to spend across their opportunities, they want to ensure they are working with partners that can deliver and can deliver in a reliable and predictable fashion. We are very proud of our operation on the deepwater fleet that we own right now, and we have strived to ensure that we can deliver that level of performance no matter where we are working for whoever around the world. And I see this as a huge opportunity for us to combine two excellent operating companies and continue to deliver that sort of level of service, improve our reliability, and improve our predictability to our customers, that ensures that their projects are delivered on time, on or better than budget, and ultimately reducing the cost of these projects around the world.

It will enable more work in the future, and it will obviously help the consumer at the end of the day. So I think the other aspect of this transaction that helps is the drilling industry has gone through, as you know, a pretty rough time over the last ten to fifteen years. Many companies have had to restructure. We have been carrying a lot of debt through the down cycle, and it does not help where companies do not have a sustainable business structure. And I think for the benefit of the upstream as a whole and the benefit for our customers, having drilling contractors that are sustainable, robust, can be resilient against the inevitable cycles in this business, I think, is a huge plus, and I think this combination delivers against those.

Gregory Robert Lewis: Okay. Super helpful. And then just I did want to talk a little bit about, you know, kind of how you are thinking about the jackup markets. Definitely on a lot of investors’ minds. You know, it is, I mean, drilling is drilling, but, you know, if you think about the jackup market, it is more of an NOC-heavy market where, you know, hey, Petrobras and Equinor side, but the deepwater market is more of an IOC market. Just kind of curious how we are thinking about how does that change? Does management have to change a little bit of its view or its kind of structure in dealing with, you know, these NOCs in the Middle East and Asia versus, say, you know, the traditional opportunities that you are seeing with IOCs?

Keelan I. Adamson: Yeah, Greg. Another great question. You know, we have been a jackup player in our history. Right? We have, we understand the highly competitive nature of that arena. And as we enter back into the jackup business post close, we are looking forward to embracing the lessons we have learned over time as an operator ourselves, and, of course, Valaris have done a great job with running their jackup fleet in a competitive environment with NOCs and international operators around the world. Clearly, it is a business that needs to be run very efficiently to generate good cash from that business, and it is important that companies who run those businesses understand the subtleties of how to manage that cost structure and ensure that they can get the efficiencies and the performance from that jackup market.

So it is not strange to us. We certainly learned from the past, and I see a great opportunity for us to learn from the Valaris team that runs that jackup fleet to continue to deliver exceptional performance and incremental cash to the combined entity going forward.

Gregory Robert Lewis: Super helpful. Thank you very much.

Keelan I. Adamson: Thank you, Greg.

Operator: Thank you. Our next question comes from Eddie Kim with Barclays. Please go ahead. Your line is open.

Eddie Kim: Hi. Good morning. So this group as a whole often gets a bad rap because the offshore inflection always seems to be about twelve to eighteen months away. You and your peers have been consistently saying for several quarters now that this inflection will happen in late 2026 and into 2027. We do not necessarily disagree with that. But just curious, what gives you the confidence that this is going to happen on time this time around? And outside of some sort of oil price collapse, do you see much risk of this getting pushed out?

Keelan I. Adamson: Yeah. Morning, Eddie. No. I think it really stems from twofold. It stems from our conversations that we have all the time with our customers, and it also stems from the data that comes through from the number of tenders that release, the number of prospects that are going through their field development programs. And some of the public commentary from the oil and gas company executives that are starting to talk a little bit about reserve replacement, declining production, and the need to build exploration budgets to ensure that they are able to do that. So we triangulate around lots of pieces of information, some subjective, some very objective. And that is all triangulating now to I think what we have said all along is we felt like 2026 and early 2027, we were certainly going to bridge into over 90% utilization across our drillship fleet and that is continuing to play out.

And there has been some recent news that I highlighted in my commentary that, you know, was kind of hidden from view at that point in time. Roddie, do you want to add anything to that? Yeah. For sure. So just to pick up the what gives us the confidence. So as we look at, you know, last year, the number of rig years that were awarded just progressively got better and better, quarter over quarter. We went from, like, 12 rig years to 14 to 18 and then 22 rig years in the fourth quarter, which was actually disappointing for us because we were expecting probably double that to be awarded. There were several awards that slipped into 2026. But you will see that from, you know, not only ourselves, but a lot of our competitors have booked multiyear programs.

So we see a lot of multiyear programs, whereas we only saw a few last year. We see a lot more now. We are actually tracking, I think, at 32 open tenders that are expected to be awarded over the next few months. So those open tenders, the average length is well beyond a year. So there is just a lot of work being awarded now. I think you saw that period in 2025 where a lot of the customers were basically kind of, you know, protecting their own balance sheets and, you know, not putting on excessive amount of commitment. But, as we work through that capital discipline, what we are seeing now is a transition now clearly towards it is time to develop a lot of these assets that they discovered over the last couple of years. And a marked increase in exploration budget because the pressure is now on to find replacement reserves.

So we are very confident in terms of the number of awards that have been made. So I would say that is not a forward projection. That is data that is in the market already. We are definitely through the trough of contracting and now we are kind of on the other side of things beginning to really pick up. So again, just lots of opportunities. And they are all much longer in term than they were before.

Eddie Kim: Got it. Very helpful color and great to hear. Thank you. Just wanted to ask about the Petrobras blend-and-extends. Those negotiations have taken a little bit longer than we had, but you said you expect those to conclude by the end of the quarter. Just curious if your full-year guidance already baked in some potential earnings risk related to those blend and extends, if the results of those negotiations should be seen as an incremental impact to the guidance you have laid out?

R. Vayda: Yeah. So thanks for the question. The guidance that we provide is representative of our best guess based upon the conversations that we have had. So I would not consider it to be significant incremental upside with respect to the blend-and-extends.

Eddie Kim: Got it. Understood.

Keelan I. Adamson: Great. Thanks for the call. I will turn it back. Thank you.

Operator: Our next question comes from Fredrik Stene with Clarksons Securities. Please go ahead. Your line is open.

Fredrik Stene: Thank you, Fredrik. Hope all is well. And thank you for the detailed market commentary in your prepared remarks. I wanted to touch a bit on, I guess, fleet placement in general. I think the way I interpreted your commentary was that, you know, the U.S. might, while it is your best long term, might face, you know, some softness in the near term, but then you have, you know, good activity levels in West Africa, which is a great example. I think the ONGC tender, which came out yesterday, kind of in the new format, was incremental to what most of us have expected, at least if you asked me a couple of months back. So just wondering, do you have any color on how you see your fleet positioned, let us say, a year out in time?

Do you expect many rigs to move regions, or do you think some of that will, call it, be solved by the acquisition of Valaris? Just thinking about, you know, you having rigs available to actually compete in most of these long-term tenders. Thank you.

Keelan I. Adamson: Fredrik, and thanks for the question. Yes. Look, I think what we definitely see is opportunities developing as discussed in the Africa and Asia regions. We operate in, as you know, a global worldwide market that is highly competitive. We are able to move our units anywhere around the world that meets that demand. I would say because we have a very high-spec fleet, our customers are always going to want, all else being equal, the higher-spec rig that they can find. As we experience, you know, the Gulf has been a strong market. It will continue to be a strong demand. If there is any near-term softness in that area, we will move those rigs to the other opportunities that exist around the world. Brazil continues to be a high utilization area for drillships.

And the Med has been, it is great to see the Med back. It is great to see a lot of activity building in the Mediterranean. Obviously, the gas and energy security conversation is playing a role there. But, yeah, that is the way we see the movement. And I will just pass it over to Roddie. He will have a couple more comments to add.

Roderick J. Mackenzie: Yeah. No. Exactly right, Keelan. And great that you noted the ONGC tender that came out. I mean, that is twenty to twenty five rig years in one go that was on nobody’s radar. So I think that stuff is extremely interesting. You know, the stuff that is coming out of Mozambique, interesting. The stuff that is coming out of Indonesia, very interesting. And, of course, we are engaged in discussions that, you know, not at liberty to divulge, but, you know, there is plenty of other activity going on. And as Keelan pointed out, for these hot rigs that are doing a great job performance-wise, the customers are very interested. I just think there is no shortage of opportunities. And if there is any near-term softness in the Gulf of Mexico, I mean, at the moment, we are fully utilized.

But if that does transpire, then I do not think there is any problems in moving those rigs onto other programs. There is certainly enough work around the world for the rigs over the next couple of years. It is just a question of timing and when we move things. But yeah, we are super pumped about the opportunities that have just recently been announced that nobody has got in their models. So I think that is really going to push utilization up.

Fredrik Stene: Yeah. No. I agree. I think that is both of us. We are going to see kind of probably do something with everybody’s mindset about how tight this market can become. Just one follow-up, which relates to one of the U.S. Gulf rigs. I think you mentioned that the guidance included some idle time on KG2, Proteus, and Skiros. You know, the Asgard, that is running off in June this year. Should I, you know, by adding these two things together, assume that the Asgard might have some new work coming up for it shortly?

R. Vayda: Yeah. I do not really have anything I can comment on at this time, but if anything does happen, of course, we will announce it in due course.

Fredrik Stene: Alright. Thank you so much. Have a good day.

Keelan I. Adamson: Thanks, Fredrik.

Operator: Thank you. We will move next with Doug Becker with Capital One. Please go ahead. Your line is open.

Doug Becker: Thank you. Q1 investors are always voting with their pocketbooks, and it looks like they like the Valaris acquisition. Just curious on the early response from customers.

Keelan I. Adamson: Yeah. Doug, good morning. Thanks for the question. You know, the feedback I have had from our customers, and I know speaking with my counterpart, Anton, at Valaris, has been overwhelmingly positive. They understand the situation in the market. They understand the need to drive costs out of the business. They understand that the opportunity, you know, as they have, they have had to look at consolidation from their business perspective, they understand that it should not, it does not surprise them that consolidation would happen in the drilling contractor offshore rig business as well. And I think they are very supportive of the potential of the combination. They are very supportive of both companies’ operations.

You know, there are things to learn from each of us, and we will look to grab those and where we can improve our service to our customers around the world and on a bigger scale basis, we will be doing that. And so overwhelmingly positive comments, directly from the customers that we deal with on an operational basis. I have been very pleased with that. And they can see where the synergies of these companies will come to benefit them and their project delivery.

Doug Becker: Well, it is very encouraging. Also wanted to circle back on the blend-and-extend negotiations with Petrobras. Just trying to think through what would you consider a win-win for Petrobras, where maybe they get some rate relief in the near term, but to make it a successful negotiation for Transocean Ltd. as well.

R. Vayda: Yeah. I will take that one. Yeah. So Petrobras is all about basically cost reductions and optimization. So the concept is not just about day rates and what have you, but also a lot around terms and conditions and doing things in the contract that kind of, for want of a better word, reduce mutual waste. So we are feeling pretty good about that in terms of, you know, the opportunity to be more efficient with revenue. So we will get a couple of points up on revenue efficiency, that kind of stuff. But also, this is kind of like the workhorse of the fleet. Right? So you have got the sixth-gen rigs down there that provide a great service. They do a fantastic job. And we love the idea about, you know, putting significant extensions on those because we are talking about quite a lot of rig years.

So that kind of checks everybody’s boxes. If we can be a bit more efficient cost-wise for them and at the same time extend our kind of core sixth-gen fleet and keep them busy for the foreseeable future, that is a real win. So we are excited about that. We hope that does come to fruition. And, yeah, as we say, we will definitely update when we have definitive developments there.

Keelan I. Adamson: Maybe one add on that. I think every drilling contractor understands that continuity is really important for delivering performance over time, and Petrobras, you know, they have the ability to scale their operations, drive those efficiencies, and they understand the value of continuity with their fleet as well. And so from our perspective, it addresses utilization for our sixth-gen and low seventh-gen fleet. It allows us to work with our customer to drive their cost down. And to improve our Ts and Cs and reclaim some of that benefit to the company in that way. And we are able then to provide a service for longer on a high-continuity basis, which can only be good for our cash flow generation.

Doug Becker: That makes sense.

Noel Augustus Parks: Thank you.

Operator: We will move next with Keith Beckman with Pickering Energy Partners. Please go ahead. Your line is open.

Keith Beckman: Hey. Thanks for taking my question. Had a question around, you know, in a market that is much further along and everything is more positive, capacity is a little bit tighter, do you have any feel on which of your three seventh-gen rigs could potentially come back to market first? And does that change at all with Valaris’ three seventh-gen stacked rigs as well?

Keelan I. Adamson: Yeah. It is, look. We are going to be really excited when the utilization gets to that point, right? But right now, obviously, we have got an active fleet that needs to roll over. We are very encouraged by the market signs that are there right now to continue to find opportunities for the active fleet. We are very happy with the three seventh-gen units that we have kept on the sideline, and the Valaris units obviously are high spec as well. So we take the same standpoint. We will not bring one of these units back speculatively. And the market would need to be in a position where we could recover the investment of those reactivations inside that contract. We believe that the longer-term outlook is very strong, and the opportunities will present themselves, but we do not see that in the very near term.

Keith Beckman: Awesome. That is helpful. And then my second question kind of comes back around to the Gulf market again in the back half of the year. Whenever I look at kind of what is in the fleet and could potentially be rolling off, I look at the Conqueror, Proteus, and Asgard, late this year potentially needing some work. I just wanted to know if all of those were to win work, I am assuming there is a little bit of upside to your guidance. Just wanted to get a feel for what is baked into 2026 guidance in regards to those three rigs.

R. Vayda: Yeah. So we called out the three rigs that we, you know, we think it makes sense to assume some idle time, with upside associated with those under the conditions that I suggested. The other asset that you mentioned, I think, are all probable to go back to work. It is sort of what we have thought about. So there is some probability-weighted assumption in the guidance range, but it would definitely move it towards the higher end.

Keelan I. Adamson: Yes. And just some color around those rigs. Obviously, as you know, they are our highest-spec drillships in the world. There are opportunities for these rigs to pick up additional work. We are fairly confident that the market will develop nicely for those units to grab some utilization. I think, you know, it is important to remember that we want to keep these rigs working. We want to keep our utilization up. And at the same time, we understand the value of those assets. So we will be looking to fill it with short-term work recognizing that the longer term is a little bit more constructive and ensuring that we are keeping our powder dry.

Keith Beckman: That is very helpful. I will turn it back. Thanks for taking my questions.

Keelan I. Adamson: Thank you.

Operator: Thank you. We will move next with Noel Parks with Tuohy Brothers. Please go ahead. Your line is open.

Noel Augustus Parks: Hi. Good morning. One thing I was wondering is, as you had mentioned that there has been more public commentary about reserve replacement among producers, and the need for exploration. I am just wondering among the players out there who might have been the latest to the party in terms of, you know, deciding that, yeah, we have to address the return to the offshore. I am just wondering, maybe you could kind of characterize what some of the more recent companies approaching you have been thinking. I am just wondering, have they been sort of sitting back and deciding that, you know, they are happy to be fast followers? Or are they, you know, now feeling like, oh, we have hung on the sidelines too long. We need to be more aggressive given the tightness in supply. I was wondering about, like, as I said, the latecomers.

Roderick J. Mackenzie: I think this is really a story about many of the companies pivoting back towards oil and gas, particularly offshore and deepwater. So it is really a story about, you know, there is less commentary or there is a pivot away from spending a tremendous amount of money in renewables and alternatives. And definitely much more of a focus and an acknowledgment, if you would, that, you know, the most economic, the most reliable sources of energy are coming from traditional hydrocarbon sources. So I think that is the key shift that we are seeing is that there is a pivot back towards the business that we are directly engaged in. And within that, we do offer the most cost-effective and the lowest carbon barrels. So there is a lot of wins there for that, and I think it is really a case of reality governs everything and eventually, all kind of head towards that path.

So that is definitely what we are seeing from our customers is that they are perhaps not spending more money overall in the name of capital discipline, but they are pivoting back towards stuff that makes the most sense, which is the business that we are focused on.

Noel Augustus Parks: Right. Thanks. And related question, does producer M&A and A&D activity, do you see anything particular either announced or on the horizon that you see as, you know, potentially exciting opportunity. It seems we are kind of in a mode of basins rationalization, but perhaps that is weighted more toward the independents. But even among those, there are quite a few of them that maybe went entirely onshore for a decade or so but have a legacy of international and offshore operations. Is there anything in anything you have seen in the sort of state of deals we have seen recently has been quite interesting to you.

R. Vayda: Yeah. I mean, obviously, we have seen several consolidations there. Over the past couple of years. Do not see a tremendous number more on the table, but, you know, I am sure whatever makes sense, that is going to happen, you know, for the same reasons that we are going through our consolidation. It is all about bringing those costs down and making ourselves more efficient. So it is actually not necessarily a bad thing, because the industry overall, with the nature of these consolidations, just becomes more efficient. We become more cost effective. And therefore, we attract more dollars towards our type of exploration, our type of development. That is very important for us. So I think the consolidation at various sectors in the industry, it just makes sense from that point of view.

Noel Augustus Parks: Great. Thanks a lot.

Roderick J. Mackenzie: Thanks, Noel. Thank you.

Operator: At this time, there are no further questions in queue. I will now turn the meeting back to David.

David Kiddington: Alright. We would like to thank everyone who participated in our earnings conference today and invite you to follow up with us for any additional inquiries. And with that, we will close the call.

Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.