Forward‑Looking Information

The statements included in this annual report regarding future financial performance and results of operations and other statements that are not historical facts are forward‑looking statements within the meaning of Section 27A of the United States (“U.S.”) Securities Act of 1933 as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).1934.  Forward‑looking statements in this annual report include, but are not limited to, statements about the following subjects:

Forward‑looking statements in this annual report are identifiable by use of the following words and other similar expressions:

Such statements are subject to numerous risks, uncertainties and assumptions, including, but not limited to:

The foregoing risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward‑looking statements.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.  All subsequent written and oral forward‑looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties.  You should not place undue reliance on forward‑looking statements.  Each forward‑looking statement speaks only as of the date of the particular statement.  We expressly disclaim any obligations or undertaking to release publicly any updates or revisions to any forward‑looking statement to reflect any change in our expectations or beliefs with regard to the statement or any change in events, conditions or circumstances on which any forward‑looking statement is based, except as required by law.

PART I

Item 1.Business1.Business

Overview

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” the “Company,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells.  As of February 11, 2016,9, 2017, we owned or had partial ownership interests in and operated 6156 mobile offshore drilling units.  As of February 11, 2016,9, 2017, our fleet consisted of 2830 ultra‑deepwater floaters, seven harsh environment floaters, fivethree deepwater floaters, 11six midwater floaters and 10 high‑specification jackups.  At February 11, 2016,9, 2017, we also had sixfour ultra‑deepwater drillships and five high‑specification jackups under construction or under contract to be constructed.

Our primary business is to contract our drilling rigs, related equipment and work crews predominantly on a dayrate basis to drill oil and gas wells.  We specialize in technically demanding regions of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services.  We believe our mobile offshore drilling fleet is one of the most versatile fleets in the world, consisting of floaters and high‑specification jackups used in support of offshore drilling activities and offshore support services on a worldwide basis.

Transocean Ltd. is a Swiss corporation with its registered office in Steinhausen, Canton of Zug and with principal executive offices located at Chemin de Blandonnet 10, 1214 Vernier, Switzerland.  Our telephone number at that address is +41 22 930‑9000.  Our shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “RIG” and on the SIX Swiss Exchange (“SIX”) under the symbol “RIGN” (see “—Recent Developments”).  For information about the revenues, operating income, assets and other information related to our business, our segments and the geographic areas in which we operate, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 22—21—Operating Segments, GeographicalGeographic Analysis and Major Customers.”

Recent Developments

Transocean Partners—On November 23, 2015, we announced our intent to delist our shares from the SIX, and on December 17, 2015, we announced that the SIX listing authorities approved our application to delist our shares.  Such delisting is expected to become effective on March 31,9, 2016, with the last trading day scheduled to be March 30, 2016.  Our shares will continue to be listed and traded on the NYSE.

On October 29, 2015, shareholders at our extraordinary general meeting approved the reduction of the par value of each of our shares to CHF 0.10 from the original par value of CHF 15.00.  The par value reduction became effective as of January 7, 2016 upon registration in the commercial register.

On August 5, 2014, we completed an initial public offering to sell a noncontrolling interest in Transocean Partners LLC (“Transocean Partners”) completed a merger with one of our subsidiaries as contemplated under the Agreement and Plan of Merger (the “Merger Agreement”), dated July 31, 2016, and as amended on November 21, 2016.  Following the completion of the merger, Transocean Partners became a consolidated Marshall Islands limited liability company, which tradeswholly owned indirect subsidiary of Transocean Ltd.  Each Transocean Partners common unit that was issued and outstanding immediately prior to the closing, other than the units held by Transocean and its subsidiaries, was converted into the right to receive 1.20 of our shares.  To complete the merger, we issued 23.8 million shares from conditional capital.

Markets for our shares—Our shares were previously listed on the NYSESIX Swiss Exchange (“SIX”) under the ticker symbol “RIGP”“RIGN”.  Through Transocean Partners Holdings Limited, a Cayman Islands company andEffective March 31, 2016, at our wholly owned subsidiary, we holdrequest, our shares were delisted from the controlling interest with 21.3 million common units and 27.6 million subordinated units and all of the incentive distribution rights.  See “Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 15—Noncontrolling Interest.”SIX.

Drilling Fleet

Fleet overview—Our drilling fleet can be generally characterized as follows: (1) floaters, including drillships and semisubmersibles, and (2) jackups.  Most of our drilling equipment is suitable for both exploration and development, drilling, and we normally engage in both types of drilling activity.  Likewise, allAll of our drilling rigs are mobile and can be moved to new locations in response to customer demand.  All of our mobile offshore drilling units are designed to operate in locations away from port for extended periods of time and have living quarters for the crews, a helicopter landing deck and storage space for drill pipe, riser and drilling supplies.  Our drilling fleet can be generally characterized as follows: (1) floaters, including drillships and semisubmersibles, and (2) jackups.

Drillships are generally self‑propelled vessels, shaped like conventional ships, and are the most mobile of the major rig types.  All of our high‑specification drillships are ultra‑deepwater capable and equipped with a computer‑controlled dynamic positioning thruster system, which allows them to maintain position without anchors through the use of their onboard propulsion and station‑keeping systems.  DrillshipsThese rigs typically have greater deck load and storage capacity than early generation semisubmersible rigs, which provides logistical and resupply efficiency benefits for customers.  Drillships are generally better suited to operations in calmer sea conditions and typically do not operate in areas considered to be harsh environments.  We have 1315 ultra‑deepwater drillships in operation that are, and sixfour ultra‑deepwater drillships under construction that will be, equipped with our patented dual‑activity technology.  Dual‑activity technology employs structures, equipment and techniques using two drilling stations within a dual derrick to allow these drillships to perform simultaneous drilling tasks in a parallel, rather than a sequential manner, reducing critical path activity, to improve efficiency in both exploration and development drilling.  In addition to dynamic positioning thruster systems, dual‑activity technology, industry‑leading hoisting capacity and a second blowout preventer system, four of our sixfour newbuild drillships under construction will be outfitted to accommodate a future upgrade to a 20,000 pounds per square inch (“psi”) blowout preventer.

two custom‑designed, high‑capacity, dual‑activity semisubmersible drilling rigs, equipped for year‑round operations in harsh environments, including those of the Norwegian continental shelf and sub‑Arctic waters.  We have three semisubmersibles whichthat are designed for mild environments and are equipped with the unique tri‑act derrick.  The tri‑act derrick, which was designed to reduce overall well construction costs assince it allows offline tubular and riser handling operations to occur at two sides of the derrick while the center portion of the derrick is being used for normal drilling operations through the rotary table.  Additionally, fiveFive of our 3023 semisubmersibles are equipped with our patented dual‑activity technology.

Jackup rigs are mobile self‑elevating drilling platforms equipped with legs that can be lowered to the ocean floor until a foundation is established to support the drilling platform.  Once a foundation is established, the drilling platform is then jacked further up the legs so that the platform is above the highest expected waves.  These rigs are generally suited for water depths of 400 feet or less.  We have five newbuild high‑specification jackups under construction that are expected to be capable of constructing wells up to 35,000 feet deep and feature advanced offshore drilling technology, including offline tubular handling features and simultaneous operations support.

Fleet categories—We further categorize the drilling units of our fleet as follows: (1) “ultra‑deepwater floaters,” (2) “harsh environment floaters,” (3) “deepwater floaters,” (4) “midwater floaters” and (5) “high‑specification jackups.”

Ultra‑deepwater floaters are equipped with high‑pressure mud pumps and are capable of drilling in water depths of 7,500 feet or greater.  Harsh environment floaters are capable of drilling in harsh environments in water depths between 1,500 and 10,000 feet and have greater displacement, which offers larger variable load capacity, more useable deck space and better motion characteristics.  Deepwater floaters are generally those other semisubmersible rigs and drillships capable of drilling in water depths between 4,500 and 7,500 feet.  Midwater floaters are generally comprised of those non‑high‑specification semisubmersibles that have a water depth capacity of less than 4,500 feet.  High‑specification jackups have high capacity derricks, drawworks, mud systems and storage and generally have a water depth capacity of between 350 and 400 feet.

As of February 11, 2016,9, 2017, we owned and operated a fleet of 6156 rigs, excluding rigs under construction, as follows:

Fleet status—Depending on market conditions, we may idle or stack non‑contracted rigs.  An idle rig is between drilling contracts, readily available for operations, and operating costs are typically at or near normal levels.  A stacked rig typically has reduced operating costs, is staffed by a reduced crew or has no crew and is (a) preparing for an extended period of inactivity, (b) expected to continue to be inactive for an extended period, or (c) completing a period of extended inactivity.  Stacked rigs will continue to incur operating costs at or above normal operating levels for approximately 30 to 60 days following initiation of stacking.  Some idle rigs and all stacked rigs require additional costs to return to service.  The actual cost to return to service, which in many instances could be significant and could fluctuate over time, depends upon various factors, including the availability and cost of shipyard facilities, cost of equipment and materials and the extent of repairs and maintenance that may ultimately be required.  We consider these factors, together with market conditions, length of contract, dayrate and other contract terms, when deciding whether to return a stacked rig to service.  We may, from time to time, consider marketing stacked rigs as accommodation units or for other alternative uses until drilling activity increases and we obtain drilling contracts for these units.  We may not return some stacked rigs to work for drilling services or for these alternative uses.

Drilling units—The following tables, presented as of February 11, 2016,9, 2017, provide certain specifications for our rigs.  Unless otherwise noted, the stated location of each rig indicates either the current drilling location, if the rig is operating, or the next operating location, if the rig is in shipyard with a follow‑on contract.  As of February 11, 2016,9, 2017, we owned all of the drilling rigs in our fleet noted in the tables below, except for the following: (1) those specifically described as being owned through our interests in consolidated entities that were less than wholly owned and (2) Petrobras 10000, which is subject to a capital lease through August 2029.

Rigs under construction (11)(9)

Harsh environment floaters (7)

Markets

Our operations are geographically dispersed in oil and gas exploration and development areas throughout the world.  We operate in a single, global offshore drilling market, as our drilling rigs are mobile assets and are able to be moved according to prevailing market conditions.  We may mobilize our drilling rigs between regions for a variety of reasons, including to respond to customer contracting requirements or capture demand in another locale.  Consequently, we cannot predict the percentage of our revenues that will be derived from particular geographic or political areas in future periods.

As of February 11, 2016,9, 2017, our drilling fleet was located in the U.K. North Sea (13(11 units), U.S. Gulf of Mexico (10(nine units), Trinidad (seven(nine units), Spain (four units), Brazil (three units), Malaysia (three units), Norway (five(three units), Brazil (four units), Angola. Thailand (three units), Thailand (threeCanada (two units), Congo (two units), India (two units), Malaysia (two units), Nigeria (two units), Australia (one unit), Canada (one unit), Gabon (one unit), Ivory CoastAngola (one unit), Myanmar (one unit), Romania (one unit), Singapore (one unit), South Africa (one unit), Spain (one unit) and United Arab Emirates (one unit).

We categorize the market sectors in which we operate as follows: (1) ultra-deepwater, (2) deepwater, (3) midwater and (4) jackup.  The ultra‑deepwater, deepwater and midwater market sectors, collectively known as the floater market, are serviced by our drillships and semisubmersibles, seven of which are suited to work in harsh environments.  We generally view the ultra-deepwater market sector as water depths beginning at 7,500 feet and extending to the maximum water depths in which rigs are capable of drilling, which is currently up to 12,000 feet.  The deepwater market sector services water depths beginning at approximately 4,500 feet to approximately 7,500 feet, and the midwater market sector services water depths from approximately 300 feet to approximately 4,500 feet.  The jackup market sector begins at the outer limit of the transition zone, which is characterized by coastal and state water areas, extending to water depths of approximately 400 feet.

The market for offshore drilling rigs and associatedrelated services reflects oil companies’ demand for equipment for drilling exploration, appraisal and development wells and for performing maintenance on existing production wells.    Activity levels of exploration and production (“E&P”) companies and their associated capital expenditures are largely driven by the worldwide demand for energy, including crude oil and natural gas.  Worldwide energy supply and demand drives oil and natural gas prices, which, in turn, impact E&P companies’ ability to fund investments in exploration, development and production activities.

At present, theThe industry is presently experiencing a cyclical downturn.  Sustained weak commodity pricing has resulted in our customers delaying investment decisions and postponing exploration and production programs.  OilAlthough oil and natural gas prices have improved recently, such prices do not currently support sustained demand for drilling rigs across all asset classes and regions.  As a result of this reduced demand, we have seenobserved a sharp decline in the execution of drilling contracts for the global offshore drilling fleet and an unprecedented level of early drilling contract terminations.early terminations and cancellations.  We currently expect very few drilling contracts to be awarded in 2016,2017, exacerbating the excess rig capacity and resulting in continued downward pressure on dayrates.  In this environment, older and less capable assets are more likely to be permanently retired, ultimately reducing the available supply of drilling rigs.  During the years ended December 31, 2016, 2015 and 2014, we sold for scrap value 11, 17 and two drilling units, respectively, for scrap value, and at December 31, 2015,2016, we have fivehad one additional rigsrig classified as held for sale for scrap value.

Despite current market conditions, our long‑term outlook for the offshore drilling sector remains positive, particularly for high‑specification assets.  Prior to the downturn, Brazil, the U.S. Gulf of Mexico, and West Africa emerged as key ultra‑deepwater market sectors, and licensing activity demonstrated an increased interest in deepwater fields as E&P companies looked to explore new prospects.  We expect deepwater oil and gas production will continue to be a part of the long‑term strategy for E&P companies as they strive to replace reserves to meet global demand for hydrocarbons replacing reserves.hydrocarbons.  A number of new deepwater and ultra‑deepwater development opportunities have been identified globally.  If commodity prices stabilize and rebound to sustainable levels, we anticipate that many of the projects will receive approval to move forward.  Many ofTypically, these projects are technically demanding due to factors such as water depth, complex well designs, deeper drilling depth, high pressure and temperature, sub‑salt, harsh environments, and heightened regulatory standards; therefore, they require sophisticated drilling units.  Generally, ultra‑deepwater rigs are the most modern, technologically advanced class of the offshore fleet and have capabilities that are attractive to exploration and productionE&P companies operating in deeper water depths, or other challenging environments or with complex well designs.

Financial Information about Geographic Areas

The following table presents the geographic areas in which our operating revenues were earned (in millions):

water surface.  Also, under all of our current drilling contracts, the operator indemnifies us against damage to the well or reservoir and loss of subsurface oil and gas and the cost of bringing the well under control.  However, our drilling contracts are individually negotiated, and the degree of indemnification we receive from the operator against the liabilities discussed above can vary from contract to contract, based on market conditions and customer requirements existing when the contract was negotiated.  In some instances, we have contractually agreed upon certain limits to our indemnification rights and can be responsible for damages up to a specified maximum dollar amount, which is, in any case, immaterial to us.  The nature of our liability and the prevailing market conditions, among other factors, can influence such contractual terms.  In most instances in which we are indemnified for damages to the well, we have the responsibility to redrill the well at a reduced dayrate.  Notwithstanding a contractual indemnity from a customer, there can be no assurance that our customers will be financially able to indemnify us or will otherwise honor their contractual indemnity obligations.  See “Item 1A. Risk Factors—Risks related to our business—Our business involves numerous operating hazards, and our insurance and indemnities from our customers may not be adequate to cover potential losses from our operations.”

The interpretation and enforceability of a contractual indemnity depends upon the specific facts and circumstances involved, as governed by applicable laws, and may ultimately need to be decided by a court or other proceeding, which will need to consider the specific contract language, the facts and applicable laws.  The law generally considers contractual indemnity for criminal fines and penalties to be against public policy.  Courts also restrict indemnification for criminal fines and penalties.  The inability or other failure of our customers to fulfill their indemnification obligations, or unenforceability of our contractual protections could have a material adverse effect on our

Technological Innovation

We are a leading international provider of offshore contract drilling services for oil and gas wells.  We specialize in technically demanding sectors of the global offshore drilling business.  Our fleet is considered one of the most versatile in the world with a particular focus on deepwater and harsh environment drilling capabilities.  Since launching the offshore industry’s first jackup drilling rig in 1954, we have achieved a long history of technological innovations, including the first dynamically positioned drillship, the first rig to drill year‑round in the North Sea and the first semisubmersible rig for year‑round sub‑Arctic operations.  In recent years, weWe have repeatedly achieved the world water depth record, holdingworld records in the current world record at 10,411 feet.  Eighteen rigspast.  Twenty drillships and semisubmersibles in our existing fleet are, and six of our rigsfour drillships that are currently under construction will be, equipped with our patented dual‑activity technology, which allows our rigs to perform simultaneous drilling tasks in a parallel rather than sequential manner and reduces critical path activity while improving efficiency in both exploration and development drilling.  Additionally, three rigs in our existing fleet are equipped with the unique tri‑act derrick, which allows offline tubular and riser activities during normal drilling operations and is patented in certain market sectors in which we operate.

We continue to develop and deploy industry‑leading technology.  In addition to our patented dual‑activity drilling technology, some of our most recent newbuild drillships will include industry‑leading hookload capability, compensated cranes for performing subsea installations, hybrid power systems and reduced emissions and advanced generator protection.  The newbuildSeven drillships in our existing fleet are, and our four drillships that are under construction will also be, outfitted with two blowout preventers and triple liquid mud systemssystems.  Three drillships in our existing fleet are, and our four drillships that are under construction will be, designed to accept 20,000 psi blowout preventers in the future.  The effective use of and continued improvements in technology to address our customers’ requirements are critical to maintaining our competitive position within the contract drilling services industry.  We expect to continue to develop technology internally, through partnerships, such as our collaboration withthe digital transformation program focused on utilizing analytics and data science to continuously improve operational integrity and efficiency while optimizing cost.  In addition, we are focused on a customer to developbreakthrough drilling innovation program that includes a fault‑resistant and fault‑tolerant blowout preventer control system, or to acquire technology through strategic acquisitions.system.

Environmental Compliance

Our operations are subject to a variety of global environmental regulations.  We monitor our compliance with environmental regulation in each country of operation and, while we see an increase in general environmental regulation, we have made and will continue to make the required expenditures to comply with current and future environmental requirements.  We make expenditures to further our commitment to environmental improvement and the setting of a global environmental standard as part of our wider corporate responsibility effort.standard.  We assess the environmental impacts of our business, focusing on the areas of greenhouse gas emissions, climate change, discharges and waste management.  Our actions are designed to reduce risk in our current and future operations, to promote sound environmental management and to create a proactive environmental program.  To date, we have not incurred material costs in order to comply with recent environmental legislation, and we do not believe that our compliance with such requirements will have a material adverse effect on our competitive position, consolidated results of operations or cash flows.

For a discussion of the effects of environmental regulation, see “Item 1A. Risk Factors—Risks related to our business—Compliance with or breach of environmental laws can be costly, expose us to liability and could limit our operations.”

Available Information

Our website address is www.deepwater.com.  Information contained on or accessible from our website is not incorporated by reference into this annual report on Form 10‑K and should not be considered a part of this report or any other filing that we make with the U.S. Securities and Exchange Commission (the “SEC”).SEC.  We make available on this website free of charge, our annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K and amendments to those reports as soon as reasonably practicable after we electronically file those materials with, or furnish those materials to, the SEC.  You may also find on our website information related to our corporate governance, board committees and company code of business conduct and ethics.  The SEC also maintains a website, www.sec.gov, which contains reports, proxy statements and other information regarding SEC registrants, including us.

We intend to satisfy the requirement under Item 5.05 of Form 8‑K to disclose any amendments to our Code of Integrity and any waiver from any provision of our Code of Integrity by posting such information in the Governance section ofpage on our website at www.deepwater.com.

Item 1A.Risk FactorsFactors

Risks related to our business

Our business depends on the level of activity in oil and gas exploration, development and production in offshore areas worldwide.  Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and, to a lesser extent, natural gas prices.

Oil and gas prices are extremely volatile and are affected by numerous factors, including the following:

Demand for our services is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil companies.  Any prolonged reduction in oil and natural gas prices could depress the immediate levels of exploration, development and production activity.  Perceptions of longer term lower oil and natural gas prices by oil and gas companies could similarly reduce or defer major expenditures given the long‑term nature of many large‑scale development projects.  Lower levels of activity result in a corresponding decline in the demand for our services, which could have a material adverse effect on our revenue and profitability.  Oil and gas prices and market expectations of potential changes in these prices significantly affect this level of activity.  However, increases in near‑term commodity prices do not necessarily translate into increased offshore drilling activity since customers’ expectations of longer‑term future commodity prices typically drive demand for our rigs.  The current commodity pricing environment has had a negative impact on demand for our services, and it could worsen.  Since December 31, 2014, thecontinue.  The price of crude oil as reported on the New York Mercantile Exchange has declined by approximately 50 percent.weakened significantly and, despite recent price improvements, has not returned to the higher levels experienced prior to December 31, 2014.  Consequently, customers have delayed or cancelled many exploration and development programs, resulting in reduced demand for our services.  Also, increased competition for customers’ drilling budgets could come from, among other areas, land‑based energy markets worldwide.  The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development and political and regulatory environments also affect customers’ drilling campaigns.  Worldwide military, political and economic events have contributed to oil and gas price volatility and are likely to do so in the future.

The offshore contract drilling industry is highly competitive with numerous industry participants, none of which has a dominant market share.  Drilling contracts are traditionally awarded on a competitive bid basis.  Although rig availability, service quality and technical capability are drivers of customer contract awards, bid pricing and intense price competition are often key determinants for which a qualified contractor is awarded a job.

The offshore drilling industry has historically been cyclical and is impacted by oil and natural gas price levels and volatility.  There have been periods of high customer demand, limited rig supply and high dayrates, followed by periods of low customer demand, excess rig supply and low dayrates.  Changes in commodity prices can have a dramatic effect on rig demand, and periods of excess rig supply may intensify competition in the industry and result in the idling of older and less technologically advanced equipment.  We have idled and stacked rigs, and may in the future idle or stack additional rigs or enter into lower dayrate drilling contracts in response to market conditions.  We cannot predict when or if any idled or stacked rigs will return to service.

During prior periods of high dayrates and rig utilization rates, we and other industry participants have responded to increased customer demand by increasing the supply of rigs through ordering the construction of new units.  In periods of low oil and natural gas price

The entry into service of these new units has increased and will continue to increase supply.  The increased supply has contributed to and may continue to contribute to a reduction in dayrates as rigs are absorbed into the active fleet and has led to accelerated stacking of the existing fleet.

Two of our sixfour ultra‑deepwater drillships and our five high‑specification jackups currently under construction have not been contracted for work.  Combined with the rapid increase in the number of rigs in the global market completing contracts and becoming idle, the number of new units expected to be delivered without contracts has intensified and may further intensify price competition.  Any further increase in construction of new units would likely exacerbate the negative impact of increased supply on dayrates and utilization rates.  Additionally, lower market dayrates and intense price competition may drive customers to demand renegotiation of existing contracts to lower dayrates in exchange for longer contract terms.  In an over‑suppliedoversupplied market, we may have limited bargaining power to negotiate on more favorable terms.  Lower dayrates and rig utilization rates could adversely affect our revenues and profitability.

Certain of our drilling contracts with customers may be cancelable at the option of the customer upon payment of an early termination payment.  Such payments may not, however, fully compensate us for the loss of the contract.  Drilling contracts also customarily provide for either automatic termination or termination at the option of the customer typically without the payment of any termination fee, under various circumstances such as non‑performance, as a result of significant downtime or impaired performance caused by equipment or operational issues, or sustained periods of downtime due to force majeure events.  Many of these events are beyond our control.  During periods of depressed market conditions, we are subject to an increased risk of our customers seeking to repudiate their contracts, including through claims of non‑performance.  We are at continued risk of experiencing early contract terminations in the current weak commodity price environment as operators look to reduce their capital expenditures.  During the yearyears ended December 31, 2016 and 2015, our customers early terminated or cancelled contracts for Discoverer Americas,  Polar Pioneer,  Sedco 714,  SedcoEnergyeight and Transocean Spitsbergen,five of our rigs, respectively, and these rigs currently remain idle.  Subsequent to December 31, 2015, we received notices of early termination or cancellation of drilling contracts for Deepwater Champion,  Deepwater Millennium, Discoverer Deep Seas, GSF Constellation II,  GSF Development Driller I and Transocean John Shaw.  Our customers’ ability to perform their obligations under their drilling contracts, including their ability to fulfill their indemnity obligations to us, may also be negatively impacted by an economic downturn.  Our customers, which include national oil companies, often have significant bargaining leverage over us.  If our customers cancel some of our contracts, and we are unable to secure new contracts on a timely basis and on substantially similar terms, or if contracts are suspended for an extended period of time or if a number of our contracts are renegotiated, it could adversely affect our consolidated statement of financial position, results of operations or cash flows.  See “Item 1. Business—Contract Drilling Services.”

At February 11, 2016, the9, 2017, our contract backlog associated with our continuing operations was approximately $15.5$11.3 billion.  This amount represents the firm term of the drilling contract multiplied by the contractual operating rate, which may be higher than the actual dayrate we receive or we may receive other dayrates included in the contract, such as waiting on weather rate, repair rate, standby rate or force majeure rate.  The contractual operating dayrate may also be higher than the actual dayrate we receive because of a number of factors, including rig downtime or suspension of operations.

Several factors could cause rig downtime or a suspension of operations, including:

In certain drilling contracts, the dayrate may be reduced to zero or result in customer credit against future dayrate if, for example, repairs extend beyond a stated period of time.  Our contract backlog includes signed drilling contracts and, in some cases, other definitive agreements awaiting contract execution.  We may not be able to realize the full amount of our contract backlog due to events beyond our control.  In addition, some of our customers have experienced liquidity issues in the past and these liquidity issues could be experienced again if commodity prices decline to lower levels for an extended period of time.  Liquidity issues and other market pressures could lead our customers to go into bankruptcy or could encourage our customers to seek to repudiate, cancel or renegotiate these agreements for various reasons (see “—Our drilling contracts may be terminated due to a number of events”events, and, during depressed market conditions, our customers may seek to repudiate or renegotiate their contracts.”).  Our inability to realize the full amount of our contract backlog may have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Our ability to renew expiring drilling contracts or obtain new drilling contracts will depend on the prevailing market conditions at the time.  If we are unable to obtain new drilling contracts in direct continuation with existing contracts or for our uncontracted newbuild units, or if new drilling contracts are entered into at dayrates substantially below the existing dayrates or on terms otherwise less favorable compared to existing contract terms, our revenues and profitability could be adversely affected.

The offshore drilling markets in which we compete experience fluctuations in the demand for drilling services.  A number of existing drilling contracts for our drilling rigs that are currently operating are scheduled to expire before December 31, 2017.  Seven of the units we currently have under construction as part of our newbuild program, two ultra‑deepwater drillships and our five high‑specification jackups, are being constructed without customer drilling contracts.  We will attempt to secure drilling contracts for these units prior to their completion.  We may be unable to obtain drilling contracts for our rigs that are currently operating upon the expiration or termination of such contracts or obtain drilling contracts for our newbuilds, and there may be a gap in the operation of the rigs between the current contracts and subsequent contracts.  In particular, if oil and natural gas prices remain low, as is currently the case, or it is expected that such prices will decrease in the future, at a time when we are seeking drilling contracts for our rigs, we may be unable to obtain drilling contracts at attractive dayrates or at all.

We must make substantial capital and operating expenditures to maintain our fleet.  These expenditures could increase as a result of changes in the following:

Changes in offshore drilling technology, customer requirements for new or upgraded equipment and competition within our industry may require us to make significant capital expenditures in order to maintain our competitiveness.  In addition, changes in governmental regulations, safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations, may require us to make additional unforeseen capital expenditures.  As a result, we may be required to take our rigs out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment.  In the future, market conditions may not justify these expenditures or enable us to operate our older rigs profitably during the remainder of their economic lives.

In addition, in order to execute our growth plan, we may require additional capital in the future.  If we are unable to fund capital expenditures with our cash flow from operations or sales of non-strategic assets, we may be required to either incur additional borrowings or raise capital through the sale of debt or equity securities.  Our ability to access the capital markets may be limited by our financial condition at the time, by changes in laws and regulations or interpretation thereof and by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control.  If we raise funds by issuing equity securities, existing shareholders may experience dilution.  Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business and on our consolidated statements of financial condition, results of operations and cash flows.

CertainDuring the year ended December 31, 2015, three credit rating agencies have recently downgraded thetheir credit ratings of our non‑credit enhanced senior unsecured long‑term debt (“Debt Rating”).  In February 2015, Moody’s Investors Service downgraded our to Debt Rating toRatings that are below investment gradegrade.  During the year ended December 31, 2016 and in October 2015,January 2017, the same three credit rating agencies further downgraded our Debt Rating, and recently announced that our Debt Rating is again under review for further downgrade.  In March 2015, Standard & Poor’s downgraded our Debt Rating to below investment grade and recently further downgraded our Debt Rating with negative outlook.  In October 2015, Fitch Ratings downgraded our Debt Rating to below investment grade and recently further downgraded our Debt Rating with negative outlook.