Transocean Ltd. (RIG) Q4 2022 Earnings Call Transcript

Transocean Ltd. (NYSE:RIG) Q4 2022 Earnings Conference Call February 22, 2023 9:00 AM ET

Company Participants

Alison Johnson – Director of Investor Relations

Jeremy Thigpen – Chief Executive Officer

Keelan Adamson – President and Chief Operating Officer

Mark Mey – Executive Vice President and Chief Financial Officer

Roddie Mackenzie – Executive Vice President and Chief Commercial Officer

Conference Call Participants

Greg Lewis – BTIG

Eddie Kim – Barclays

Fredrik Stene – Clarksons Securities

Thomas Johnson – Morgan Stanley

David Smith – Pickering Energy Partners

Samantha Hoh – Evercore ISI

Operator

Good day, everyone, and invited to nan Transocean Fourth Quarter 2022 Earnings Conference Call. At this time, each participants are successful a listen-only mode. Later you will person a opportunity to inquire questions during nan question-and-answer session. [Operator Instructions] Please statement this telephone will beryllium recorded and I’ll beryllium opinionated by if you should request immoderate assistance.

It is now my pleasance to move nan convention complete to Alison Johnson, Director of Investor Relations. Please spell ahead.

Alison Johnson

Thank you, Todd. Good morning, and invited to Transocean’s 4th fourth 2022 net convention call. A transcript of our property merchandise covering financial results, on pinch supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures are posted connected our website astatine deepwater.com.

Joining maine connected this morning’s telephone 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 nan people of this call, Transocean guidance whitethorn make definite forward-looking statements regarding various matters related to our business and institution that are not humanities facts. Such statements are based upon existent expectations and definite assumptions, and therefore, are taxable to definite risks and uncertainties.

Many factors could origin existent results to disagree materially. Please mention to our SEC filings for our forward-looking statements and for much accusation regarding definite risks and uncertainties that could effect our early results.

Also, please statement that nan institution undertakes nary work to update aliases revise forward-looking statements. Following Jeremy, Keelan, and Mark’s prepared comments, we will behaviour a question-and-answer convention pinch our team. During this time, to springiness much participants an opportunity to speak, please limit yourself to 1 first mobility and 1 follow-up question. Thank you very much. I’ll now move nan telephone complete to Jeremy.

Jeremy Thigpen

Thank you, Alison, and invited to our employees, customers, investors, and analysts participating connected today’s call. As reported successful yesterday’s net release, for nan 4th quarter, Transocean delivered adjusted EBITDA of $140 cardinal connected $625 cardinal successful adjusted revenue, resulting successful an adjusted EBITDA separator of astir 20%, which erstwhile mixed pinch nan caller fixtures we were awarded successful a 4th fourth person helped america to adjacent nan afloat twelvemonth 2022 connected a very affirmative note.

Indeed we deliberation that 2022 will beryllium remembered arsenic a pivotal twelvemonth successful nan offshore drilling industry, peculiarly for Transocean. Offshore contracting activity accrued significantly, driving utilization rates and time rates materially higher passim nan year. And arsenic evidenced by our December and January statement announcements, Transocean continues to beryllium a superior beneficiary of this heightened demand.

Needless to opportunity nan past respective months person been a very engaged but rewarding clip for nan Transocean trading squad arsenic they helped america to unafraid an incremental $1.5 cardinal successful backlog during nan quarter, bringing our afloat twelvemonth backlog added to astir $4 billion. As a reminder of our caller statement awards, successful nan U.S. Gulf of Mexico, nan Deepwater Invictus was awarded a three-well statement pinch an independent usability astatine $425,000 per time for an estimated 100 days.

The statement is expected to commence and nonstop continuation of nan rigs existent program. In Brazil, nan KG2 was awarded a 910-day statement astatine astir $430,000 per time including integrated services. The statement is expected to commencement successful nan 3rd 4th this year. Also successful Brazil, nan contracts for nan antecedently disclosed action of Deepwater Corcovado and Deepwater Orion for nan excavation tender person been finalized.

As a reminder, Deepwater Corcovado was awarded a four-year statement astatine $399 per time and is expected to statesman successful nonstop continuation of nan rigs existent program. The Deepwater Orion was awarded a three-year statement astatine $416,000 per time and is expected to commence successful nan 4th fourth of this year.

Concern connected [indiscernible] Energy exercised 1 good action astatine a complaint of $360,000 per time connected its statement pinch Development Driller III. The incremental wells expected to past 90 days and keeps nan rig engaged done nan 3rd quarter.

In Norway, antecedently disclosed options nether nan Transocean Nordic statement pinch Wintershall Dea and OMV are now firm. The mean time complaint for this incremental word of 773 days is astir $428,000 per day.

In nan UK North Sea Transocean Barents was awarded a 1 good statement pinch a awesome usability astatine a complaint of $310,000 per day. The activity is anticipated to commence this 4th and past astir 110 days.

Finally and besides successful nan UK North Sea Harbor Energy exercised nan 3rd action connected its statement pinch nan Paul B Loyd Jr. [indiscernible] wells astatine $175,000 per day. The further position expected to past 275 days and extended nan statement of nan 3rd 4th of 2024. As you’ve nary uncertainty spot successful our finance and ineligible organizations person besides been highly engaged supporting a assortment of transactions.

In November, we announced our number liking successful Liquila Ventures, a associated task pinch Lime Rock Partners and Perestroika, we’re excited to partner pinch these 2 organizations that person a heavy knowing of nan offshore drilling marketplace to bring Deepwater Aquila different precocious load – precocious hook load, ultra deepwater drill vessel to nan market.

As portion of nan statement pinch our associated task partners, Transocean maintained nan exclusive correct to marketplace and negociate nan operations of this rig. In early January, we raised unafraid financing connected nan Deepwater Titan and we besides refined definite bid of our unafraid notes improving our liquidity.

Mark will talk these and different efforts to simplify our equilibrium expanse successful a fewer moments. Additionally, earlier this month, we announced our finance successful Global Sea Mineral Resources aliases GSR, a deep-sea mineral exploratory company, which included nan publication of 1 of our stacked drillships, Ocean Rig Olympia. The Olympia was an optimal campaigner for this transaction based connected nan number of criteria, including full size and easiness of conversion to a nodule postulation vessel.

Contribution of this rig, though further rationalizes – besides further rationalizes nan world fleet of a 9 situation floaters and we judge will yet beryllium to beryllium a amended usage of this plus benefiting our shareholders complete time. In speech for our investment, modulation received a non-controlling liking successful GSR, pinch GSR responsible for operations of nan vessel.

This is Transocean’s 2nd finance successful nan deep-sea minerals exploration industry. As you recall, past twelvemonth we purchased a number liking successful Ocean Minerals Ltd. Through these transactions, we are excited to play – contributing to nan diversification of world power proviso and a little c economy. Our projects and operations teams besides accomplished cardinal objectives passim 2022.

Notably, Deepwater Atlas commences its made – statement pinch nan Beacon Offshore and we took transportation of nan Deepwater Titan from nan shipyard. I’m very pleased to stock that successful conscionable its first fewer months of operation, nan Atlas has already group a caller grounds for nan longest 14-inch casing tally astir 3.8 miles, apt nan first of galore records to beryllium group pinch this caller people of drilling asset.

In fact, astatine this time, I’ll manus it complete to Keelan to further talk these 2 state-of-the-art eighth procreation drillships. Keelan?

Keelan Adamson

Thank you, Jeremy, and bully greeting to all. I would for illustration to commencement disconnected by thanking our task and operations teams, our cardinal suppliers and Sembcorp Marine for their singular dedication and committedness to complete nan building of our 2 state-of-the-art eighth procreation drillships Deepwater Atlasand nan Deepwater Titan.

I would besides for illustration convey our customers Beacon Offshore Energy and Chevron, who person contracted nan Atlas and Titan respectively for trusting america to activity pinch them connected their manufacture starring 28 deepwater improvement projects. These rigs correspond nan newest procreation of drillships tin of drilling and completing wells that were antecedently either technically aliases commercially infeasible.

We often talk nan 20,000 psi capacity of these assets. Indeed, Atlas and Titan will beryllium nan first 2 drillships outfitted pinch complete 20K good power packages including nan blowout preventers. This functionality opens nan doorway projects specified arsenic Anchor and Shenandoah and galore different prospects yet to beryllium developed chiefly successful nan U.S. Gulf of Mexico.

In summation to their 20K tin Atlas and Titan are nan first and for nan foreseeable future, nan only drillship fitted pinch a nett lifting capacity of 3 cardinal pounds. This capacity allows our customers to optimize their good designs and tally heavier and longer casing strings, which construe instantly to little good and section improvement costs. Perhaps much importantly, these improved good designs tin yet facilitate larger accumulation tubing boards and truthful summation accumulation per well.

The rigs, which besides characteristic extends of platform abstraction and purpose-built areas to accommodate good completion activities are nan astir tin drills successful nan world and will yet grow nan beingness of exploration and improvement opportunities. With nan transportation of nan Atlas and Titan, Transocean has now brought a full of 9 caller build and afloat statement drillships to its fleet successful nan past decade. These additions person had a marked effect connected nan capacity and operating ratio of our fleet to enabled america to refine our expertise, bringing ships retired of nan gait and into service. Expertise, which we expect will beryllium invaluable arsenic we put our idle and stacked rigs connected statement and return them to nan progressive fleet.

Our anticipation is that these caller builds will execute astatine nan fleet mean gross ratio level wrong nan first six months of operation, which would beryllium an bonzer accomplishment for immoderate caller build floater, particularly since these rigs are equipped pinch a assortment of serial number 1 equipment. We look to use lessons learned from nan transportation of our caller builds arsenic we reactivate our acold stacked assets. A successful rig reactivation is not only completing nan task activity scope successful statement pinch costs and clip expectations, but besides starting operations safely, reliably and efficiently.

To execute this, a drilling contractor must person a robust operational guidance system. Transocean’s operational civilization is information driven, work focused and capacity oriented. Over nan past respective years, we developed and implemented a multitude of technologies and processes to support these pillars, resulting successful nan transportation of operational excellence crossed our fleet. These devices supply our group pinch nan correct accusation astatine nan correct clip to make nan correct decisions.

Technologies see smart instrumentality analytics, which allows america to show nan wellness and information of our instrumentality successful existent time, licence and obstruction imagination a civilization exertion which facilitates our expertise to call, work, place and negociate consequence effectively, and our operations process system, OPS, a integer level which provides our group pinch nan tasks, activity designs and verification checks that are basal to present procedural subject flawless execution.

As our manufacture embarks connected this agelong overdue cycle, drilling contractors must flooded nan operational challenges that a institution restarting rigs and bringing them backmost into operations safely, reliably, and efficiently. Because they’ve been preparing for this reality done nan downturn by investing successful our people, assets and technology, Transocean has nan acquisition and capacity to turn our operational fleet pinch nan precocious level of performance. We look guardant to nan opportunity to steadily bring our idle fleet backmost into work successful nan safest, astir of costs effective mode to champion guarantee nan highest returns for our shareholders.

With that, I will manus it backmost to Jeremy.

Jeremy Thigpen

Thanks, Keelan. The imaginable of a reactivation is very topical. As each of our drillships that are not lukewarm aliases acold stacked presently contracted. Active drillship utilization is expected to stay astatine aliases supra 97% for nan adjacent 2 years. With progressive utilization of nan highest specification assets astatine aliases adjacent 100%. We expect that nan request for our rigs and services will stay elevated for nan foreseeable future. In fact, if existent tendering and bid opportunities that we’re alert of nan activity starting successful 2024 and 2025 to create arsenic expected, request cannot beryllium met by nan existent progressive proviso of drillships.

Having said that, we were perfectly patient successful our position that we will not reactivate a rig unless our customers, location a operation of mobilization fees, time complaint and word salary for nan full reactivation positive an acceptable return successful nan first contract. Rig request and caller harsh [ph] situation is robust. Indeed, complete nan adjacent 18 months, an estimated 82 programs are anticipated to beryllium awarded for a full of 74 rig usage of work. Importantly, this request is globally diversified. Consistent pinch this outlook, manufacture analysts foretell nan number of wells drilled offshore will summation by astir 15% successful 2023.

Brazil presently continued to lead incremental request for offshore drilling services pinch a imaginable for up to 19 floater awards, of these up to 8 whitethorn beryllium contracted nether existing unfastened Petrobras tenders. Brazil has been an important root of request for nan past 2 years and we expect this to proceed successful 2023. Importantly, nan incremental request is driving higher time rates, which person already – 117% from 2020 to 2022. We expect that caller fixtures will proceed diminution arsenic progressive proviso successful nan region is exhausted, requiring assets from different regions, immoderate of which will request to beryllium reactivated and upgraded to beryllium mobilized to support nan request successful Brazil.

While we presently don’t spot nan aforesaid measurement of semipermanent activity we spot successful Brazil, nan U.S. Gulf of Mexico is expected to stay comparatively tight pinch section proviso and request keeping and comparative balance. This region typically demands nan highest specification rigs pinch nan highest hook loads, which presently are each nether contract. Additionally, based connected our nonstop negotiations, we judge that location could capable early request to bring 1 aliases 2 much rigs into nan region connected semipermanent programs. West Africa and nan Mediterranean are besides knowledgeable a return of demand.

While galore opportunities are comparatively short successful long location are aggregate multi-year tenders including 1 successful Angola pinch Azule Energy, a associated task betwixt Eni and BP and 1 successful Romania pinch OMV. We are encouraged by nan uptick and requirements successful this region arsenic drilling is predicted to summation astir 14% this year. In India, ONGC will require up to 3 rigs to fulfill its existent and upcoming tenders. To fulfill these requirements, rig from different regions will request to beryllium mobilized and arsenic pursuing our announcement that nan KG2 is heading to Brazil, location are presently nary ultra-deep h2o rigs disposable successful nan region. As such, we expect rates connected these awards to beryllium higher than nan astir caller awards successful India.

Taking a holistic position of nan precocious specification harsh situation market, aggregate harsh situation semi-submersibles person departed Norway for different regions, and moreover much expected to get to beryllium contracted elsewhere. In nan past 18 months, six semis person departed Norway for activity successful West Africa, Canada, and nan UK, North Sea. We expect astatine slightest 2 further semis will – Norway successful nan adjacent 12 months perchance for opportunities successful Australia. If this happens, we judge location will beryllium a proviso shortage successful Norway successful 2024.

As mentioned successful erstwhile calls, nan taxation incentives successful Norway encouraged grounds sanctioning complete nan past 2 and half years pinch 35 projects totaling astir 190 wells sanctioned. As this translates to heightened demand, we judge Norway’s floater marketplace will spot a beardown comeback successful activity from 2024 that will require rigs to return to meet nan expected demand.

In summary, our outlook for precocious specification floating fleet is starkly positive, disposable progressive proviso of precocious specification floaters remains bid, and connected nan backdrop of nan different beardown request environment, we expect our customers will proceed to exempt [ph] unafraid assets for longer term, which successful move should support nan prevailing upward trajectory of time rates. An acute attraction connected delivering safe, reliable, and businesslike operations arsenic good arsenic reducing our indebtedness Transocean is good positioned to prosper and present shareholder worth arsenic we proceed done what we expect should beryllium a sustained multiyear recovery.

I’ll now move nan telephone complete to Mark.

Mark Mey

Thank you, Jeremy, and bully time to all. Through today’s call, I will concisely recap 4th fourth results and past supply guidance for nan first 4th arsenic good arsenic an update of our expectations for afloat twelvemonth 2023. Lastly, I will supply an update connected our liquidity forecast to 2023.

I’d for illustration to return a fewer minutes to reappraisal nan galore liability guidance actions we person taken complete nan past year. First successful July, 2022, we extended our revolving in installments installation done June, 2025. Then successful September we contracted an speech of securities that provided nan institution pinch incremental $175 cardinal successful liquidity. Last period we executed much transactions, a $525 cardinal secured financing connected nan Deepwater Titan and a $1.175 cardinal refinancing of our 4 bid of elder notes, some transactions of which were good oversee by nan market. In nan discourse of today’s liking complaint and aliases broader get superior marketplace situation these 2 transactions materially improved our mean word liquidity and further group nan shape for america opportunistically delever, simplify and amended nan elasticity of our equilibrium sheet.

Now to nan results. As reported successful nan property release, which see further item connected our results for nan 4th fourth of 2022, we reported nett nonaccomplishment attributable to controlling liking of $350 cardinal aliases $0.48 per diluted share. After definite adjustments are stated successful yesterday’s property release, we reported adjusted nett nonaccomplishment of $356 million.

During nan 4th we generated adjusted EBITDA of $140 million, which translated into rate travel from operations of astir $178 cardinal [ph]. And our antagonistic free rate travel of $231 cardinal successful nan 4th fourth reflected nan CapEx associated pinch shipyard payments for our 2H invention drillships. This was subsequently offset pinch nan $525 cardinal raise successful Deepwater Titan, arsenic I mentioned earlier.

Looking person astatine our results, during nan 4th quarter, we delivered adjusted statement drilling revenues of astir $625 cardinal astatine an mean time complaint of $349,000. This is supra our guidance and reflects much than anticipated operating days, higher than expected recharge gross and beardown prize revenue.

Operating and attraction disbursal for nan 4th fourth was $423 million. This is beneath our guidance, chiefly owed to some little than expected in-service and different work attraction expenses, mostly owed to timing and little P&L costs.

2022 rate travel successful nan equilibrium sheet, we ended nan 4th fourth of a full liquidity of astir $1.8 billion, including unrestricted rate and rate equivalents of astir $683 million, astir $275 cardinal of restricted rate for indebtedness work and $774 cardinal from our undrawn revolving in installments facility.

We’re now providing updates connected expectations for nan first 4th and afloat twelvemonth financial performance. Revenue guidance is based chiefly connected patient contracts arsenic listed successful our Fleet Status Report, but besides includes a speculative [ph] component, which we person a precocious level grade of confidence.

Any imaginable prize gross is excluded from guidance. For nan first 4th 2023, we expect adjusted statement drilling gross of $635 cardinal based upon an mean fleet quired gross ratio of 96.5%. This is somewhat higher than nan 4th fourth of 2022, mostly owed to accrued activity connected definite rigs partially offset by less operating days to quarter. For nan afloat twelvemonth and arsenic I’ve guided past quarter, we’re anticipating willing revenues to beryllium betwixt $2.9 cardinal and $3 billion, besides based connected 96.5% gross efficiency.

As usual, arsenic nan twelvemonth progresses, we whitethorn modify our guidance arsenic an necessary. We expect first 4th O&M disbursal to beryllium approximate $430 million. This flimsy quarter-over-quarter summation is chiefly owed attributable to higher costs included successful narration to nan statement mentation of nan Deepwater Orion and nan KG2 for contracts successful Brazil, partially offset by little successful work attraction activities.

For nan afloat year, we’re participating gain and disbursal to beryllium astir $1.9 billion. We expect G&A disbursal for this 4th to beryllium astir $50 cardinal and ranging betwixt $200 cardinal and $210 cardinal for nan year. Excluding further non-cash charges associated pinch a adjacent worth accommodation of nan basal speech characteristic embedded successful our exchangeable bonds issued successful nan 3rd 4th of 2022 nett liking disbursal for nan first 4th is forecast to beryllium astir $120 million. This includes capitalized liking of astir $18 million.

For nan afloat year, we’re anticipating nett liking disbursal of astir $470 million, including capitalized liking of astir $30 million. Capital expenditures including capitalized liking for nan first 4th of forecast will beryllium astir wrong $15 million. This includes astir $85 cardinal for caller build CapEx and astir $30 cardinal of attraction CapEx. Cash taxes are expected to beryllium astir $10 cardinal for nan first 4th and astir $40 cardinal for nan year.

Our expected liquidity successful December of 2023 is peculiar to beryllium betwixt $1.3 cardinal and $1.4 billion, reflecting our gross and costs guidance and including nan $600 cardinal capacity of our revolving in installments installation and restricted rate of astir $210 million, which is chiefly reserved for that service. This liquidity forecast includes 2023 CapEx expectations of $275 cardinal of which $175 cardinal related to our caller bills arsenic we item successful our website CapEx schedule and a $100 cardinal for attraction CapEx. The attraction CapEx includes astir $20 cardinal is contractually required for nan 2 semipermanent contracts of nan Deepwater Orion and nan KG2 successful Brazil and $30 cardinal for our fleet-wide [indiscernible] program.

The caller committee CapEx includes mobilization, superior liking 20K BOP upgrades and superior spend. In conclusion, our indebtedness reliability actions complete nan past 12 months person positioned america good for further improving our superior structure. We whitethorn important advancement connected clearing our liquidity 1 way. We will now attraction connected simplify and correct sizing our equilibrium sheet.

As much of our rigs modulation to higher statement time rates, rate flows exemplary accelerate organically leveraging. We already seeing this pinch different group pinch free provender for which estimated mean statement time complaint is summation astir $30,000 year-over-year to astir $340,000 per time arsenic indicated successful our Fleet Status Report. As we are successful nan early shape of nan cyclical recovery, we expect this train to continue.

As I stated successful nan past quarter, we do not person plans to utilize our ATM equity income program. We judge that nan existent scheme [ph] for nan offshore drilling marketplace supports our expertise to organically trim our information overtime without nan usage of incremental equity. We will, however, proceed to prosecute delivering actions arsenic and erstwhile that makes sense. Operationally we stay focused, delivering safe, reliable, and businesslike operations, which yet supports our deleveraging goals and creates worth for our shareholders.

This concludes my prepared comments. I’ll now move it backmost complete to Alison.

Alison Johnson

Thanks, Mark. Todd, we’re now fresh to return questions. As a reminder to nan participants, please limit yourself to 1 first mobility and 1 follow-up question.

Question-and-Answer Session

Operator

Thank you, Alison. [Operator Instructions] Our first mobility comes from Greg Lewis pinch BTIG.

Greg Lewis

Thank you, and bully greeting and bully day everybody. Jeremy, intelligibly congratulations connected each nan activity you guys person done complete nan past mates years and connected getting nan KG2 to work, that rig was your past title rig. As we look up successful this twelvemonth and successful nan adjacent year, intelligibly location are going to be, immoderate of your competitors person reactivated rigs. You’ve alluded to reactivating rigs arsenic request travel successful and customers are willingly to salary more. As we deliberation about, your expertise to reactivate rigs and what’s going connected successful nan existent market. Does it make consciousness for Transocean to possibly connected nan early broadside aliases nan later broadside of that nan activity of rig reactivations, we deliberation are going to beryllium needed to travel into nan marketplace to meet request complete nan adjacent 2 years?

Jeremy Thigpen

Hey, acknowledgment for nan speedy question, Greg. I don’t deliberation we’ve alluded to anything. I deliberation we’ve been very clear successful our position connected reactivations, that nan customer has to salary for it successful nan first contract, and by that, immoderate shape aliases substance of upfront costs mobilization fees positive time complaint and word that much than pays for nan reactivation itself, it really generates a suitable return for Transocean, and truthful that whitethorn mean that we’re later to, to nan reactivation statement than immoderate of our peers if they’re consenting to reactivate connected spec aliases for lesser returns. And we’re okay pinch that.

Roddie Mackenzie

Yes, I think, this is Roddie here, I get to adhd to that a small bit, truthful to benignant of show that discipline, it’s often difficult for america to talk astir individual tenders and awards and negotiations. However, there’s a mates awesome example, 1 successful Brazil, which is, arsenic you cognize connected definite tenders are afloat nationalist location wherever each nan results are published. So for illustration successful nan excavation tender successful nan batch 2 basket, that’s 1 wherever we won a occupation pinch nan Orion, we were besides nan adjacent rig to beryllium awarded successful that line, and nan time complaint connected nan rig was $474,000 a day.

However, erstwhile we went done nan specifications of this and we went done nan timeline that Petrobras was going to execute upon, we decided that nan rate flows conscionable didn’t meet our return requirements, truthful we benignant of stepped speech from that 1 and took nan disciplined attack of not putting guardant nan [indiscernible] into that that tender immoderate further. And since past nan Petrobas moved to nan adjacent usability aliases nan adjacent rig contractor, and that’s going to beryllium nan according to nan results of nan nationalist tender, nan DS-8, which should spot their grant astatine $460,000 a day. That’s nan publically disclosed accusation connected that. We’ll person to hold and spot really that turns out, but we conscionable wanted to reassure you that we return that subject very, very earnestly and we person walked distant from immoderate contracts because they did not supply return lease arsenic to beryllium adequate.

Greg Lewis

Yes, it seems for illustration these multiyear contracts are going to beryllium pricing’s going to beryllium heading higher. I did want to displacement gears to nan North Sea and to nan harsh fleet, conscionable because it’s an important EBITDA driver for nan company. Yes, we’re – it seems for illustration we’re successful this aerial pouch successful Norway, successful 2023. As we deliberation astir that and possibly immoderate opportunities, let’s possibly say, I cognize you mentioned Australia connected nan call, but arsenic we deliberation astir immoderate of these rigs and really nan market’s processing successful West Africa, we person nan 1 idle rig, nan 1 of nan CAT [ph] rigs, relying that it’s h2o extent is what for illustration 1,700 feet aliases thing on those lines wherever extracurricular of a spot for illustration Norway, and I conjecture nan Southern North Sea, could we spot rigs, immoderate of these, those CAT rigs perchance find work? Or is it benignant – much of a, conscionable negociate and hold for that marketplace to rebound successful 2024?

Roddie Mackenzie

Yes. Okay. Great question. I’ll return that one. So arsenic Jeremy had explained, we spot that there’s fundamentally astir six rigs moving retired of nan Norwegian market. What’s absorbing successful that is, if you look astatine nan proviso of rigs disposable to nan Norwegian marketplace and you look astatine nan numbers successful for illustration 2021 and you comparison them to wherever we are successful 2023, successful a play of 2 years, that number has dropped from, successful excess of 20, astir 22 rigs down to 13 rigs disposable successful 2023. So, arsenic you deliberation astir nan effect that that’s going to have, that’s nan worldly that you’re talking astir wherever rigs are moving retired of nan region, they’re going to West Africa, immoderate are going to Canada. There’s a batch of speculation astir immoderate rigs possibly moreover much than 1 going to Australia, but besides nan UK and nan worldly successful West Africa seems to beryllium increasing moreover further.

And nan really absorbing point was successful discussions that we’ve had pinch definite larger operators successful South America, nan adjacent tender that we expect from them is going to beryllium specifically targeting merge units pinch precocious ratio drilling packages. So that would beryllium perfect for nan likes of nan CAT-Ds aliases immoderate of nan different precocious spec harsh situation rigs successful Norway. So conscionable to touch connected that a little, you mentioned separator earlier, truthful pinch nan costs ground being a small spot higher and Norway than it is elsewhere that’s going to beryllium a cardinal driver. So you’ve seen these benignant of six rigs move out, afloat expect to spot 3 aliases 4 much beautiful soon. And erstwhile those rigs move out, erstwhile you’ve sewage complete nan hurdle of nan activity and arsenic Jeremy pointed out, nan customers are paying for those mobilizations now you make amended margins outside.

So for those rigs to travel backmost to Norway, it’s going to beryllium an accrued hurdle for them to travel back. With that said, we person statement of show jobs connected beautiful overmuch each of our harsh situation including nan stacked CAT-D and I can’t really disclose nan specifications astir that, but fundamentally it’s safe to opportunity that for each of our harsh situation fleet, including nan stack CAT-D we’re successful progressive negotiations for placing successful each of those.

I deliberation and complete nan play of this year, you’re going to spot beautiful overmuch each those rigs get fixtures connected them. And you’ll spot that nan time rates associated those and nan locations should raise a fewer eyebrows successful position of nan trajectory of rates for harsh situation rigs.

Greg Lewis

Okay. Great. Hey, Roddie, convey you for nan time. Thanks everybody and person a awesome day.

Operator

Thank you. Our adjacent mobility comes from Eddie Kim pinch Barclays.

Eddie Kim

Hi, bully morning. So we’ve evidently seen a batch loader request nan past 9 months, which has mostly been driven by Petrobras and you guys person intelligibly been nan biggest beneficiary of that. But conscionable shifting to nan majors, we haven’t rather seen arsenic galore ample multi-year contracts from that group yet, apt because astir of them are beholden to their investors. But are we getting to a constituent wherever Petrobras is conscionable absorbing truthful galore rigs, this is almost going to unit nan fields manus successful locking up a rigs for aggregate years?

Roddie Mackenzie

Yes. So really that is what’s happening. And I would now spot that nan fields person been quiet. In fact, we signed two-year contracts pinch immoderate of nan fields successful nan Gulf of Mexico. We cognize that location are respective others to beryllium signed our multi-year contracts for nan majors. But by opposition and it would look for illustration they are moving slower.

The discourse present is they’re moving faster than they’ve ever moved successful nan past 7 years, but Petrobras is really connected a different level. Petrobras is progressing their tenders astatine a clip that impresses everybody. But I would reason very smart move because they’re going to get nan bulk of nan disposable rigs and astatine what we would see coagulated time rates, but I deliberation successful clip they will beryllium to beryllium an absolute bargain from Petrobras constituent of position because they’ll affected mid-400s [ph].

And to your point, location will not beryllium overmuch proviso near for nan different prospects. And of people arsenic Jeremy had said, erstwhile we get into those benignant of our 90% utilization rates, that, that, that’s typically wherever nan inflection constituent connected nan adjacent tier of rates comes.

So look, we’re really optimistic astir that. Not only because we tin push a batch of measurement successful Brazil, but chiefly because they’re nan semipermanent contracts and we are opening to spot nan fields astir nan world, peculiarly West Africa are really opening to attraction connected longer-term. So you’re going to spot successful nan West African region, respective fixtures will beryllium made complete nan adjacent fewer months that will beryllium multi-year successful nature. So I deliberation you’ll spot that crossed nan Board. It’s conscionable that Petrobras is moving truthful quickly, it makes it look for illustration nan others are not.

Eddie Kim

Got it. Got it. That sounds very affirmative for time rates moving forward. Just shifting to costs, truthful 1 of your competitors yesterday highlighted higher costs this twelvemonth for offshore crews successful onshore support. Another 1 of your peers talked astir benignant of rig level OpEx moving up successful nan high-single digits rig per range. Is that thing you’re seeing aliases expecting arsenic well? And is that benignant of uptick successful costs presently embedded successful your afloat twelvemonth O&M guide?

Keelan Adamson

Yes. Thanks, Eddie. Yes, yes, intelligibly pinch your ostentation presently ongoing and nan tight labour market, we’re seeing akin costs increases, I’d opportunity location successful that 5% to 8% area if you blend some nan labour positive nan O&M costs. So yes.

Eddie Kim

Got it. Okay. Understood. Thanks for each that color. I’ll move it back.

Operator

Thank you. Our adjacent mobility will travel from Fredrik Stene pinch Clarksons Securities. And sir, please spell ahead. Your statement is live. Okay. We’ll effort our adjacent mobility looks for illustration we person different statement from Fredrik Stene pinch Clarksons Securities. Please spell ahead.

Fredrik Stene

Hey, tin you guys perceive maine now?

Jeremy Thigpen

Yes, sir, please. We tin perceive you here.

Fredrik Stene

Okay. Perfect. Sorry for – I’m not judge what happened there, but hey, Jeremy and team, and convey you for bully update today. I deliberation immoderate of my questions person been covered, but Mark, possibly you could thief maine retired there. You’ve done immoderate due activity connected nan equilibrium expanse complete nan past year, arsenic you mentioned successful nan prepared remarks.

But you besides said that, you – location mightiness beryllium much activity to do. You person def – you decidedly person immoderate rewind now, but successful position of correct sizing and simplifying your equilibrium sheets, are you capable to stock immoderate much colour astatine precocious level reasoning astir really we would spell astir that and what would beryllium sensible adjacent steps and besides timing wise connected that?

Mark Mey

Yes. So Fredrik, awesome question. Look, nan extremity of nan actions we’ve taken complete nan past 12 months was to bargain ourselves immoderate time. I’ve been saying this since I joined Transocean successful 2015. We tin ne'er delever a down cycle. Well, now we’re successful a cyclical – and arsenic a consequence of that, arsenic I mentioned successful my prepared comments, we person higher time rates generating a important rate flow.

So we are prepared to return our clip and turn into our equilibrium sheet, but by utilizing these integrated flows to delever nan equilibrium sheet. By simplify, we sewage 4 different types of indebtedness connected our equilibrium sheet. Clearly, simplifying intends taking those 4 and moving them down to 1 eventually, but complete time, truthful arsenic you know, there’s unsecured, location is secured, there’s PGNs and SPGNs, truthful intelligibly nan first attraction is going to beryllium PGNs. And past from location we’ll look astatine nan different types of indebtedness connected nan equilibrium sheet.

And past thirdly, we person exchangeable bonds. We person 3 tranches of that besides connected nan array for america to reside complete nan adjacent twelvemonth aliases so.

Fredrik Stene

Super helpful. Two different speedy ones for me, first one, nan Aquila, which you’ll person nan trading authorities to. How will you spell astir managing your finance location and besides nan older owners versus really you marketplace your ain stacked assets, for illustration really that covered [ph]?

Mark Mey

Perfect. Fredrik, I didn’t perceive you very clear, but I deliberation you’re referring to nan Aquila, if that’s nan case, we person knowledgeable successful doing this, arsenic you’re good aware, we ain a 3rd liking successful nan Norga and we person a akin process whereby we support a cleanable trading squad to debar immoderate benignant of antitrust concerns. So, we’ll usage nan aforesaid attack pinch nan Aquila and possibly if we get nan Libra that rig arsenic well.

Fredrik Stene

Perfect. Thanks. Thanks. And ace speedy for reactivations. Do you guys person immoderate thought of really galore reactivate – world reactivations nan proviso concatenation will grip per year? Do you deliberation there’s nan limit to that? How galore you and your peers tin do astatine nan aforesaid time?

Mark Mey

I’m going to return a stab astatine this and evidently Jeremy are already conjunct successful arsenic well. But I deliberation what we’ve seen correct now is nan first successful statement are not nan acold stacked rigs, it’s nan rigs that are being completed that are sitting astatine nan yards successful South Korea. And respective of these are projected to beryllium contracted successful Brazil, West Africa and elsewhere passim this year. We don’t judge that immoderate of those rigs tin really commencement connected their contracts successful 2023, fixed nan truth that I deliberation there’s a statement astir astatine slightest 12 months to activate a rig from a shipyard aliases from acold and to hole nan rig foots [ph] contract, because arsenic you know, each usability has their ain contracts cleanable requirements and instrumentality for that opportunity.

So I deliberation it’s going to beryllium measured chiefly because of this constraint, but besides because of nan truth that location is important magnitude of rate required to do this. And if you look astatine nan equilibrium expanse of nan drillers especially, those are consequence travel done restructuring. I’m not judge it supports a wholesale reactivation programme unless it’s paid upfront by nan customers.

Fredrik Stene

Right. Thank you truthful much. That’s each from me. Thanks.

Operator

Thank you. Our adjacent mobility will travel from Thomas Johnson pinch Morgan Stanley.

Thomas Johnson

Hi, thanks. Question connected nan Deepwater Atlas. Clearly, if you motion that statement aliases akin activity today, we would presume that nan rates would beryllium overmuch higher. But could you possibly springiness america an update connected really conversations are going connected nan outlook for activity for that rig pursuing benignant of nan mid-2024 expiration. And successful summation to that, possibly conscionable springiness america a speedy update connected imaginable to do immoderate secured issuance against that and really we should deliberation astir capacity location comparative to nan Titan. Thanks.

Jeremy Thigpen

Yes. Okay. I’ll return that one. Yes, truthful we’re successful discussions for follow-on activity aft [indiscernible] contract. So that’s still – a while earlier gets done that main contract. But there’s respective bites – immoderate of them which are successful nan 20k space, but arsenic Keelan had pointed out, 1 of nan astir absorbing features of nan rig is this ace precocious hook load. And we cognize that, we group nan grounds connected nan longest successful [indiscernible] successful nan Gulf of Mexico. And I person to opportunity nan grounds was group astir a fewer days earlier connected nan Deepwater Conqueror.

So that was really stressing her to her maximum capacity. And now we person nan Atlas successful nan marketplace disposable for those moreover higher hook loads. So we’re really optimistic astir that. We thinkthere’s existent request for these ultra dense casing strings, and of people she tin only do that pinch that assay, and she happens to beryllium nan 20k rig. So nan conception is we fundamentally person nan astir tin rig connected each fronts, and we’ve kept her disposable successful a comparatively near-term situation. So we’re very optimistic astir what’s going to travel adjacent for her.

Thomas Johnson

Great, thanks. And past conscionable possibly immoderate commentary connected imaginable plans aliases capacity for a secured issuance if you were to receive, a multi-year statement connected nan Atlas possibly conscionable comparative to what has been precocious announced connected nan Titan?

Mark Mey

Yes, I deliberation Thomas, we each ace that spot erstwhile we get to it, but intelligibly astatine nan moment, we don’t spot a request for that.

Thomas Johnson

Got it. Thanks. I’ll move it back.

Operator

Thank you. Our adjacent mobility comes from David Smith pinch Pickering Energy Partners.

David Smith

Hey, bully greeting and convey you. So looking astatine nan marketed floater fleet, I deliberation we spot a small summation successful typical surveys this year, adjacent to doubly arsenic galore adjacent twelvemonth for nan full marketplace floater fleet and nan operation of rigs coming up connected their 2nd aliases 3rd SPS is growing. So nan manufacture needs reactivations, possibly immoderate stranded caller transportation to accommodate increasing demand. At nan aforesaid time, it feels for illustration shipyards are engaged and OEMs person rationalized a batch of capacity successful nan past 4 years. So taking a somewhat different perspective connected a anterior question, I deliberation you mentioned really constraints, among contractors arsenic possibly a governing facet for reactivation. But I wanted to inquire if that reactivation rate were there. Just wanted to spot if – do you spot petrol for shipyard and OEM capacity to beryllium a constraint connected increasing nan proviso of progressive floaters successful nan adjacent mates years?

Mark Mey

Yes we do. Clearly, arsenic you’ve indicated, nan logic that it takes astatine slightest 12 months to reactive nan rigs, because of nan challenges that our OEMs are having because they trim capacity importantly during nan [indiscernible]. So now arsenic they’re ramping up, we’re starting to spot these challenges because request from nan drilling contractors has improved substantially. And I’ll region there. And spot Keelan has thing to add.

Keelan Adamson

No, I deliberation you’ve covered it well, Mark, I would adhd that we are continually engaged pinch our awesome cardinal suppliers to look astatine nan request forecast that we person done our collaboration agreements and attraction agreements that we person pinch those very important suppliers to us, we are capable to return a very assured look astatine nan proviso concatenation from their broadside understand their restrictions and scheme astir not only their capability, but besides our superior instrumentality that we person connected manus to grip those projects and reactivation. So it is simply a restriction. But I would opportunity that we’re moving collaboratively to find ways to region it.

Jeremy Thigpen

Sorry, I conscionable adhd to that, successful immoderate ways, successful immoderate ways nan superior constraints of nan drilling contractors and nan proviso concatenation challenges that we’re facing and nan shipyards and pinch OEMs is really patient for nan industry. We can’t do what we’ve done successful nan past and overbuild, truthful that’s why we deliberation it’s going to beryllium a prolonged betterment because we can’t overbuild arsenic an manufacture astatine this constituent successful time. And truthful while nan maturation will beryllium slow, it’ll beryllium steep and should past longer. And really maturation will travel done time rates arsenic opposed to adding a bunch of breaks to nan fleet.

David Smith

Appreciate each nan color. And sorry if I missed it, but do you person a position connected really galore floaters mightiness beryllium moving disconnected Brazil successful 2025?

Jeremy Thigpen

Yes. By nan clip we get to 2025 that counts going to summation nan scope of 40 aliases possibly moreover more. Because not only you’re looking astatine Petrobras adding important capacity, but there’s six different programs from nan likes of Shell, Total, Equinor and others that are sewage to beryllium satisfied arsenic well. So, we dip down to benignant of nan teens successful position of rig count successful Brazil, but it’s going to double complete nan adjacent small while. So, I deliberation you’re looking astatine 40, 40 positive rigs.

David Smith

Thanks truthful much.

Operator

Thank you. Our last mobility will travel from Samantha Hoh pinch Evercore ISI.

Samantha Hoh

Hi. Thanks and acknowledgment for taking my questions and congrats connected a really productive quarter. I wanted to possibly conscionable enactment a small spot connected nan taxable of Brazil. It looks for illustration you’re going to beryllium person operating a fleet of astir five, I deliberation vessels there, 5 drillships location successful that country, and conscionable a batch of attraction really astir nan U.S., Gulf of Mexico and Brazil. I was wondering if you could possibly supply immoderate benignant of commentary around, what that does for your profitability successful that region, erstwhile you person truthful galore rigs concentrated successful 1 market?

Jeremy Thigpen

Yes, okay. Around nan attraction of rigs successful that market. So what’s absorbing astir it is astir of nan activity successful Brazil comes retired successful nan shape of a tender. And arsenic you spell to nan tender, there’s fundamentally a minimum specification and you either suffice aliases you don’t. So nan specification is group realistically for what’s required successful Brazil. And nan bully point astir that from our constituent of position is, it opens up a world of possibilities for our [indiscernible] assets. So we don’t needfully person to deploy nan seventh generation, which are perchance nan highest earners to Brazil to beryllium capable to beryllium successful. So that’s why it’s been of important liking for us. We’re fundamentally taking our little spec rigs and booking them connected multi-year precocious time complaint contracts successful a region that we’re very acquainted with. And we’ve had a beingness for complete 50 years. And of people we’re now looking astatine 5 rigs being contracted there, I would beryllium very optimistic that we’d beryllium capable to adhd one, 2 aliases 3 much to that complete nan adjacent twelvemonth aliases so.

And Samantha, conscionable to adhd to that, your mobility was a small muffled connected this end, truthful apologize, but I deliberation you were asking a small spot up a mobility astir economies of scale. And location surely are economies of standard location pinch a larger – pinch a larger installed guidelines moving fleet there. It requires a tremendous magnitude of effort and clip and power and acquisition to tally 1 ultra-deepwater safely, reliably, and efficiently. But past arsenic you adhd rigs, you don’t person to adhd overmuch successful nan measurement of incremental support onshore. So there’s decidedly immoderate system of standard to beryllium had nan much rigs we tin adhd to a definite jurisdiction.

Samantha Hoh

Excellent. And I conjecture akin vein, I mean taking that rig retired of Namibia, which has gotten truthful overmuch property and excitement lately. What are your thoughts successful position of for illustration that market? And what its imaginable looks for illustration longer term? Is that, I mean, is that conscionable a position successful position of nan I conjecture exploration versus improvement type of work, and conscionable wanting that, that longer long visibility of for illustration a improvement task successful Brazil versus nan precocious floor plan exploration type activity successful Namibia?

Jeremy Thigpen

Yes, I’ll return that one. So look, nan exploration worldly successful Namibia, you’ve now sewage respective operators, who are benignant of dipped their toed connected that and they’ve had bully success. So pinch occurrence successful exploration, they move into nan improvement shape a small spot further down nan track. So, you’ve fundamentally sewage you benignant of 2 rigs moving successful Namibia. Now there’s request for more, successful truth Gulf Energies is retired for an further tender successful nan mid. So, I deliberation that’s going to beryllium a really coagulated jurisdiction for nan foreseeable future. I deliberation you’re going to spot aggregate rigs. I deliberation you’re going to move from nan benignant of exploration shape into appraisal and past improvement complete nan adjacent fewer years.

So, I would expect to spot a communicative location very akin to what you saw successful Guyana pinch ExxonMobil. So nan quality present is that you conscionable person moreover much auditors aren’t interested, truthful I deliberation that’s a really affirmative sign, peculiarly because they usage harsh situation rigs alternatively than conscionable benign rigs. But again, astir nan world, I deliberation you’ve seen a batch much discoveries successful nan past twelvemonth than you had successful immoderate erstwhile years. You will spot arsenic we displacement towards much improvement of these fields alternatively than conscionable exploration, you’re going to spot a batch much semipermanent contracts because that’s typically really this rhythm useful successful position of delivering each of those wells successful that fixed timeframe.

Samantha Hoh

Okay, convey you. And if I could conscionable compression 1 much in, it’s benignant of absorbing that you utilized that building dipping your toes. Because I deliberation earlier this twelvemonth aliases past twelvemonth erstwhile you guys first announced your JV into nan deep-sea mining, Jeremy utilized that aforesaid building astir dipping your toes, that benignant of breathtaking caller venture. I was conscionable wondering, evidently nan reasoning astir that, that imaginable opportunity has shifted a small spot and it was really bully to spot that you guys are swapping retired fundamentally nan Olympia pinch nan Aquila, what type of economics should we beryllium reasoning astir for nan Aquila? I mean, you guys mentioned that you’re looking for for illustration a 1 twelvemonth type statement initially, but is location for illustration a return type profile? Anything that we tin usage successful position of nan modeling, beryllium connected that akin successful for illustration one-third liking that you person successful nan north?

Jeremy Thigpen

Hey, Samantha, sorry, you really pulled connected this in, but I think, return astir nan return floor plan connected nan deep-sea mining opportunities.

Samantha Hoh

Yes.

Jeremy Thigpen

Oh connected nan – aliases was it connected nan Aquila?

Samantha Hoh

In Aquila.

Jeremy Thigpen

Oh, could it, we conscionable defer that to a telephone afterwards pinch nan investor teams that and now the, because, it really has been difficult to understand you. Sorry.

Samantha Hoh

Sorry astir that. But acknowledgment guys for each your time.

Jeremy Thigpen

All right. Thanks, Samantha.

Operator

Thank you. That does reason our Q&A Session. I’ll move it backmost to guidance for immoderate further aliases closing remarks.

Alison Johnson

Thank you, Todd. And convey you everyone for your information connected today’s call. We look guardant to talking pinch you again erstwhile we study our first 4th 2023 results. Have a bully day.

Operator

This concludes today’s call. Thank you for your participation. You whitethorn disconnect astatine immoderate time.