UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10‑Q~~10-Q

(Mark one)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number ~~000-53533~~001-38373

~~TRANSOCEAN LTD.~~Transocean Ltd.

(Exact name of registrant as specified in its charter)

~~Zug,~~ Switzerland	98-0599916
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Turmstrasse 30 ~~Zug,~~ Steinhausen, Switzerland	~~6300~~6312
(Address of principal executive offices)	(Zip Code)


+41 (41) 749-0500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol	Name of each exchange on which registered
Shares, CHF 0.10 par value	RIG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑þ No ☐◻

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation ~~S‑T~~S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☑þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a ~~non‑accelerated~~non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and ~~”emerging~~“emerging growth company” in Rule ~~12b‑2~~12b-2 of the Exchange Act.

Large accelerated filer ☑þ Accelerated filer ☐◻ Non‑-accelerated filer ~~(do not check if a smaller reporting company) ☐~~
◻Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b‑2~~12b-2 of the Exchange Act). Yes ☐ No ☑þ

As of ~~October 24, 2017, 391,213,324~~April 25, 2023, 766,448,046 shares were outstanding.

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM ~~10‑Q~~10-Q

QUARTER ENDED ~~SEPTEMBER 30, 2017~~March 31, 2023

Table of Contents

PART I.FINANCIAL INFORMATION

Item I.

Financial Statements

~~Item I.Financial Statements~~

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Inin millions, except per share data)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Operating revenues

Contract drilling revenues

$
699

$
886

$
2,142

$
2,912

Other revenues

109

20

202

275

808

906

2,344

3,187

Costs and expenses

Operating and maintenance

323

409

999

1,561

Depreciation

197

225

648

667

General and administrative

39

41

113

125

559

675

1,760

2,353

Loss on impairment

(1,385)

(11)

(1,498)

(26)

Gain (loss) on disposal of assets, net

(9)

9

(1,602)

8

Operating income (loss)

(1,145)

229

(2,516)

816

Other income (expense), net

Interest income

21

5

34

15

Interest expense, net of amounts capitalized

(112)

(109)

(368)

(296)

Gain (loss) on retirement of debt

(1)

110

(49)

148

Other, net

6

7

7

9

(86)

13

(376)

(124)

Income (loss) before income tax expense

(1,231)

242

(2,892)

692

Income tax expense

180

6

103

122

Net income (loss)

(1,411)

236

(2,995)

570

Net income attributable to noncontrolling interest

6

18

21

35

Net income (loss) attributable to controlling interest

$
(1,417)

$
218

$
(3,016)

$
535

Earnings (loss) per share

Earnings (loss) per share—basic

$
(3.62)

$
0.59

$
(7.72)

$
1.44

Earnings (loss) per share—diluted

$
(3.62)

$
0.59

$
(7.72)

$
1.44

Weighted-average shares outstanding

Basic

391

365

391

365

Diluted

391

365

391

365


	Three months ended
	March 31,
	2023		2022

Contract drilling revenues	$	649	$	586

Costs and expenses
Operating and maintenance		409		412
Depreciation and amortization		182		183
General and administrative		45		42
		636		637

Gain (loss) on disposal of assets, net		(170)		1
Operating loss		(157)		(50)

Other income (expense), net
Interest income		19		2
Interest expense, net of amounts capitalized		(249)		(102)
Loss on retirement of debt		(32)		—
Other, net		5		1
		(257)		(99)
Loss before income tax expense		(414)		(149)
Income tax expense		51		26

Net loss		(465)		(175)
Net income attributable to noncontrolling interest		—		—
Net loss attributable to controlling interest	$	(465)	$	(175)

Loss per share, basic and diluted	$	(0.64)	$	(0.26)
Weighted-average shares, basic and diluted		728		664

See accompanying notes.

- 1 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(Inin millions)

(Unaudited)

Three months ended

Nine months ended

September 30,

September 30,

2017

2016

2017

2016

Net income (loss)

$
(1,411)

$
236

$
(2,995)

$
570

Net income attributable to noncontrolling interest

6

18

21

35

Net income (loss) attributable to controlling interest

(1,417)

218

(3,016)

535

Components of net periodic benefit costs before reclassifications

—

8

(2)

1

Components of net periodic benefit costs reclassified to net income

4

8

12

9

Other comprehensive income before income taxes

4

16

10

10

Income taxes

(2)

—

(25)

(3)

Other comprehensive income (loss)

2

16

(15)

7

Other comprehensive income attributable to noncontrolling interest

—

—

—

—

Other comprehensive income (loss) attributable to controlling interest

2

16

(15)

7

Total comprehensive income (loss)

(1,409)

252

(3,010)

577

Total comprehensive income attributable to noncontrolling interest

6

18

21

35

Total comprehensive income (loss) attributable to controlling interest

$
(1,415)

$
234

$
(3,031)

$
542


	Three months ended
	March 31,
	2023		2022

Net loss	$	(465)	$	(175)
Net income attributable to noncontrolling interest		—		—
Net loss attributable to controlling interest		(465)		(175)

Components of net periodic benefit costs before reclassifications		(11)		(11)
Components of net periodic benefit costs reclassified to net loss		—		1

Other comprehensive loss before income taxes		(11)		(10)
Income taxes related to other comprehensive loss		—		—
Other comprehensive loss		(11)		(10)
Other comprehensive income attributable to noncontrolling interest		—		—
Other comprehensive loss attributable to controlling interest		(11)		(10)

Total comprehensive loss		(476)		(185)
Total comprehensive income attributable to noncontrolling interest		—		—
Total comprehensive loss attributable to controlling interest	$	(476)	$	(185)

See accompanying notes.

- 2 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Inin millions, except share data)

(Unaudited)

September 30,

December 31,

2017

2016

Assets

Cash and cash equivalents

$
2,717

$
3,052

Accounts receivable, net of allowance for doubtful accounts
of less than $1 at September 30, 2017 and December 31, 2016

663

898

Materials and supplies, net of allowance for obsolescence
of $154 and $153 at September 30, 2017 and December 31, 2016, respectively

437

561

Restricted cash

480

466

Other current assets

154

121

Total current assets

4,451

5,098

Property and equipment

22,599

27,372

Less accumulated depreciation

(5,117)

(6,279)

Property and equipment, net

17,482

21,093

Deferred income taxes, net

167

298

Other assets

341

400

Total assets

$
22,441

$
26,889

Liabilities and equity

Accounts payable

$
172

$
206

Accrued income taxes

159

95

Debt due within one year

799

724

Other current liabilities

755

960

Total current liabilities

1,885

1,985

Long-term debt

6,501

7,740

Deferred income taxes, net

106

178

Other long-term liabilities

1,098

1,153

Total long-term liabilities

7,705

9,071

Commitments and contingencies

Redeemable noncontrolling interest

48

28

Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at September 30, 2017 and December 31, 2016 and 391,211,739 and 389,366,241 outstanding at September 30, 2017 and December 31, 2016, respectively

37

36

Additional paid-in capital

11,020

10,993

Retained earnings

2,040

5,056

Accumulated other comprehensive loss

(298)

(283)

Total controlling interest shareholders’ equity

12,799

15,802

Noncontrolling interest

4

3

Total equity

12,803

15,805

Total liabilities and equity

$
22,441

$
26,889


	March 31,		December 31,
	2023		2022
Assets
Cash and cash equivalents	$	747	$	683
Accounts receivable, net of allowance of $2 at March 31, 2023 and December 31, 2022		499		485
Materials and supplies, net of allowance of $201 and $199 at March 31, 2023 and December 31, 2022, respectively		390		388
Restricted cash and cash equivalents		208		308
Other current assets		187		144
Total current assets		2,031		2,008

Property and equipment		23,996		24,217
Less accumulated depreciation		(6,876)		(6,748)
Property and equipment, net		17,120		17,469
Contract intangible assets		38		56
Deferred tax assets, net		17		13
Other assets		988		890
Total assets	$	20,194	$	20,436

Liabilities and equity
Accounts payable	$	246	$	281
Accrued income taxes		28		19
Debt due within one year		283		719
Other current liabilities		496		539
Total current liabilities		1,053		1,558

Long-term debt		7,342		6,628
Deferred tax liabilities, net		533		493
Other long-term liabilities		941		965
Total long-term liabilities		8,816		8,086

Commitments and contingencies

Shares, CHF 0.10 par value, 905,094,091 authorized, 142,362,093 conditionally authorized, 797,245,335 issued
and 731,847,899 outstanding at March 31, 2023, and 905,093,509 authorized, 142,362,675 conditionally
authorized, 797,244,753 issued and 721,888,427 outstanding at December 31, 2022		72		71
Additional paid-in capital		13,992		13,984
Accumulated deficit		(3,544)		(3,079)
Accumulated other comprehensive loss		(196)		(185)
Total controlling interest shareholders’ equity		10,324		10,791
Noncontrolling interest		1		1
Total equity		10,325		10,792
Total liabilities and equity	$	20,194	$	20,436

See accompanying notes.

- 3 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Inin millions)

(Unaudited)

Nine months ended

Nine months ended

September 30,

September 30,


2017

2016

2017

2016

Quantity

Amount

Shares

Balance, beginning of period

389

364

$
36

$
5,193

Issuance of shares under share-based compensation plans

2

1

1

—

Reduction of par value

—

—

—

(5,159)

Balance, end of period

391

365

$
37

$
34

Additional paid-in capital

Balance, beginning of period

$
10,993

$
5,736

Share-based compensation

30

31

Issuance of shares under share-based compensation plans

(1)

—

Reduction of par value

—

5,159

Cancellation of shares held in treasury

—

(240)

Allocated capital for transactions with holders of noncontrolling interest

—

(7)

Other, net

(2)

3

Balance, end of period

$
11,020

$
10,682

Treasury shares, at cost

Balance, beginning of period

$
—

$
(240)

Cancellation of shares held in treasury

—

240

Balance, end of period

$
—

$
—

Retained earnings

Balance, beginning of period

$
5,056

$
4,278

Net income (loss) attributable to controlling interest

(3,016)

535

Balance, end of period

$
2,040

$
4,813

Accumulated other comprehensive loss

Balance, beginning of period

$
(283)

$
(277)

Other comprehensive income (loss) attributable to controlling interest

(15)

7

Balance, end of period

$
(298)

$
(270)

Total controlling interest shareholders’ equity

Balance, beginning of period

$
15,802

$
14,690

Total comprehensive income (loss) attributable to controlling interest

(3,031)

542

Share-based compensation

30

31

Allocated capital for transactions with holders of noncontrolling interest

—

(7)

Other, net

(2)

3

Balance, end of period

$
12,799

$
15,259

Noncontrolling interest

Balance, beginning of period

$
3

$
310

Total comprehensive income attributable to noncontrolling interest

1

19

Distributions to holders of noncontrolling interest

—

(23)

Acquisition of noncontrolling interest

—

(5)

Allocated capital for transactions with holders of noncontrolling interest

—

7

Balance, end of period

$
4

$
308

Total equity

Balance, beginning of period

$
15,805

$
15,000

Total comprehensive income (loss)

(3,030)

561

Share-based compensation

30

31

Distributions to holders of noncontrolling interest

—

(23)

Acquisition of noncontrolling interest

—

(5)

Other, net

(2)

3

Balance, end of period

$
12,803

$
15,567


	March 31,
	2023		2022
Shares
Balance, beginning of period	$	71	$	64
Issuance of shares		1		3
Balance, end of period	$	72	$	67

Additional paid-in capital
Balance, beginning of period	$	13,984	$	13,683
Share-based compensation		9		7
Issuance of shares		(1)		100
Balance, end of period	$	13,992	$	13,790

Accumulated deficit
Balance, beginning of period	$	(3,079)	$	(2,458)
Net loss attributable to controlling interest		(465)		(175)
Balance, end of period	$	(3,544)	$	(2,633)

Accumulated other comprehensive loss
Balance, beginning of period	$	(185)	$	(84)
Other comprehensive loss attributable to controlling interest		(11)		(10)
Balance, end of period	$	(196)	$	(94)

Total controlling interest shareholders’ equity
Balance, beginning of period	$	10,791	$	11,205
Total comprehensive loss attributable to controlling interest		(476)		(185)
Share-based compensation		9		7
Issuance of shares		—		103
Balance, end of period	$	10,324	$	11,130

Noncontrolling interest
Balance, beginning of period	$	1	$	1
Balance, end of period	$	1	$	1

Total equity
Balance, beginning of period	$	10,792	$	11,206
Total comprehensive loss		(476)		(185)
Share-based compensation		9		7
Issuance of shares		—		103
Balance, end of period	$	10,325	$	11,131

See accompanying notes.

- 4 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Inin millions)

(Unaudited)

Nine months ended

September 30,

2017

2016

Cash flows from operating activities

Net income (loss)

$
(2,995)

$
570

Adjustments to reconcile to net cash provided by operating activities:

Depreciation

648

667

Share-based compensation expense

30

31

Loss on impairment

1,498

26

(Gain) loss on disposal of assets, net

1,602

(8)

(Gain) loss on retirement of debt

49

(148)

Deferred income tax expense

32

44

Other, net

29

11

Changes in deferred revenues, net

(109)

(30)

Changes in deferred costs, net

42

64

Changes in other operating assets and liabilities, net

61

51

Net cash provided by operating activities

887

1,278

Cash flows from investing activities

Capital expenditures

(386)

(1,072)

Proceeds from disposal of assets, net

330

16

Other, net

10

—

Net cash used in investing activities

(46)

(1,056)

Cash flows from financing activities

Proceeds from issuance of debt, net of discounts and issue costs

403

1,210

Repayments of debt

(1,629)

(1,316)

Deposits to cash accounts restricted for financing activities

(78)

(24)

Proceeds from cash accounts and investments restricted for financing activities

131

124

Distributions to holders of noncontrolling interest

—

(23)

Other, net

(3)

2

Net cash used in financing activities

(1,176)

(27)

Net increase (decrease) in cash and cash equivalents

(335)

195

Cash and cash equivalents at beginning of period

3,052

2,339

Cash and cash equivalents at end of period

$
2,717

$
2,534


	Three months ended
	March 31,
	2023		2022
Cash flows from operating activities
Net loss	$	(465)	$	(175)
Adjustments to reconcile to net cash used in operating activities:
Contract intangible asset amortization		18		29
Depreciation and amortization		182		183
Share-based compensation expense		9		7
(Gain) loss on disposal of assets, net		170		(1)
Fair value adjustment to bifurcated compound exchange feature		133		—
Loss on retirement of debt		32		—
Deferred income tax expense		36		23
Other, net		27		21
Changes in deferred revenues, net		6		(11)
Changes in deferred costs, net		(24)		(4)
Changes in other operating assets and liabilities, net		(171)		(73)
Net cash used in operating activities		(47)		(1)

Cash flows from investing activities
Capital expenditures		(81)		(106)
Investments in equity of unconsolidated affiliates		(10)		(15)
Proceeds from disposal of assets, net		1		1
Net cash used in investing activities		(90)		(120)

Cash flows from financing activities
Repayments of debt		(1,564)		(165)
Proceeds from issuance of debt, net of issue costs		1,665		—
Proceeds from issuance of shares, net of issue costs		—		103
Other, net		—		(3)
Net cash provided by (used in) financing activities		101		(65)

Net decrease in unrestricted and restricted cash and cash equivalents		(36)		(186)
Unrestricted and restricted cash and cash equivalents, beginning of period		991		1,412
Unrestricted and restricted cash and cash equivalents, end of period	$	955	$	1,226

See accompanying notes.

- 5 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells. ~~We specialize in technically demanding sectors~~As of the offshore drilling business with a particular focus on deepwater and harsh environment drilling services. Our mobile offshore drilling fleet is considered one of the most versatile fleets in the world. We contract our drilling rigs, related equipment and work crews predominantly on a dayrate basis to drill oil and gas wells. At September 30, 2017,March 31, 2023, we owned or had partial ownership interests in and operated 38a fleet of 37 mobile offshore drilling units, ~~including 25 ultra‑deepwater~~consisting of 27 ultra-deepwater floaters ~~seven~~and 10 harsh environment ~~floaters, two deepwater floaters~~floaters. As of March 31, 2023, we were constructing one ultra-deepwater drillship and ~~four midwater floaters. At September 30, 2017, we also had four ultra‑deepwater drillships under construction or under contract to be constructed.~~

~~On August 13, 2017, we entered into~~held a ~~transaction agreement (the “Transaction Agreement”) with Songa Offshore SE,~~noncontrolling ownership interest in a ~~European public~~ company limited by shares, or societas Europaea, existing under the laws of Cyprus (“Songa”), pursuant to which we will offer to acquire all of the issued and outstanding shares of Songa, subject to certain conditions, through a public voluntary exchange offer (the “Offer”). At September 30, 2017, Songa owned and operated seven mobile offshore drilling units, including four harsh environment floaters and three midwater floaters. See Note 4—Business Combination.

On May 31, 2017, we completed the sale of 10 high‑specification jackups and novated the contracts relating to the construction of five high‑specification jackups, together with related assets. At September 30, 2017 we continued to operate two high‑specification jackups that ~~were under contract when we sold the rigs, and we will continue to operate such rigs until completion or novation of the respective drilling contracts. See Note 6—Drilling Fleet.~~is constructing one ultra-deepwater drillship.

Note 2—Significant Accounting Policies

Presentation—We ~~have~~ prepared our accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S.”) for interim financial information and with the instructions to Form ~~10‑Q~~10-Q and Article 10 of Regulation ~~S‑X~~S-X of the U.S. Securities and Exchange Commission. Pursuant to such rules and regulations, these financial statements do not include all disclosures required by accounting principles generally accepted in the U.S. for complete financial statements. The condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. Such adjustments are considered to be of a normal recurring nature unless otherwise noted. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017,~~2023, or for any future period. The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto as of December 31, ~~2016~~2022 and ~~2015~~2021, and for each of the three years in the period ended December 31, ~~2016,~~2022, included in our annual report on Form ~~10‑K~~10-K filed on ~~March 7, 2017.~~February 23, 2023.

Accounting estimates—To prepare financial statements in accordance with accounting principles generally accepted in the U.S., we ~~are required to~~must make judgments by applying estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including those related to our income taxes, property and equipment, equity investments, contingencies, allowance for ~~doubtful accounts,~~excess materials and supplies, ~~obsolescence, property and equipment, assets held for sale, income taxes, contingencies, share‑based compensation, defined~~intangibles, postemployment benefit ~~pension~~ plans and ~~other postretirement benefits.~~share-based compensation. We base our estimates and assumptions on historical experience and ~~on various~~ other factors that we believe are ~~reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources.~~reasonable. Actual results could differ from such estimates.

Fair value measurements—We estimate fair value at aan exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market ~~participants in the principal market for the asset or liability.~~participants. Our valuation techniques require inputs that we categorize using a ~~three‑level~~three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) significant observable inputs, including unadjusted quoted prices for identical assets or liabilities in active markets (“Level 1”), (2) significant other observable inputs, including direct or indirect market data for similar assets or liabilities in active markets or identical assets or liabilities in less active markets (“Level 2”) and (3) significant unobservable inputs, including those that require considerable judgment for which there is little or no market data (“Level 3”). When a valuation requires multiple input levels, ~~are required for a valuation,~~ we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.

Note 3—Unconsolidated Affiliates

~~Capitalized~~We hold noncontrolling equity investments in various unconsolidated companies. In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia, which had been cold stacked, and related assets, with an estimated fair value of $85 million (see Note 5—Long-lived assets), in exchange for a noncontrolling ownership interest— in Global Sea Mineral Resources NV (together with its subsidiaries, “GSR”), a Belgian company and leading developer of nodule collection technology, which is engaged in the development and exploration of deep-sea polymetallic nodules that contain metals critical to the growing renewable energy market. We ~~capitalize~~estimated the fair value of the rig using projected discounted cash flows, and our estimate required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including assumptions related to the future performance of the rig, projected demand for its services, rig availability and dayrates. At March 31, 2023, the aggregate carrying amount of our investment in GSR was $95 million. At March 31, 2023 and December 31, 2022, the carrying amount of our investment in Liquila Ventures Ltd., the unconsolidated variable interest entity that is constructing the ultra-deepwater floater Deepwater Aquila, was $15 million, recorded in other assets. At March 31, 2023 and December 31, 2022, the aggregate carrying amount of all of our equity investments in unconsolidated affiliates was $194 million and $113 million, respectively, recorded in other assets.

During the three months ended March 31, 2023, we incurred costs of approximately $40 million for ~~qualifying construction~~Transocean Norge, primarily for contract preparation and upgrade ~~projects~~shipyard costs, which are reimbursable from Orion Holdings (Cayman) Limited, the owner of the rig, to prepare for its next contract, which is expected to commence in May 2023. At March 31, 2023 and ~~only capitalize interest costs during periods in which progress for the construction projects continues to be underway. As of September 30, 2017, we had ceased capitalization of interest costs on~~December 31, 2022, our ~~two uncontracted newbuilds due to a pause in construction progress. In the three and nine months ended September 30, 2017, we capitalized interest costs of $31~~accounts receivable from affiliates was $75 million and ~~$91~~$32 million, respectively, ~~for construction work~~recorded in ~~progress. In the three and nine months ended September 30, 2016, we capitalized interest costs of $41 million and $130 million, respectively, for construction work in progress.~~

other current assets.

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

~~Reclassifications~~—We have made certain reclassifications to prior period amounts to conform with the current period’s presentation. Such reclassifications did not have a material effect on our condensed consolidated statement of financial position, results of operations or cash flows.

Note ~~3—New Accounting Pronouncements~~4—Revenues

~~Recently adopted accounting standards~~

~~Stock compensation~~Overview—Effective January 1, 2017, we adopted the accounting standards update that allows for simplification of the accounting for share‑based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The update is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Our ~~adoption did not have~~drilling services represent a ~~material effect on our condensed consolidated statements~~single performance obligation under most of ~~financial position, operations or cash flows or on the disclosures contained in our notes to condensed consolidated financial statements.~~

~~Recently issued accounting standards~~

~~Revenue from contracts with customers~~—Effective January 1, 2018, we will adopt the accounting standards update that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Given the interaction with the accounting standards update related to leases, we expect to adopt the updates concurrently, effective January 1, 2018. We expect to apply the full retrospective approach to our adoption, which is consistent with the approach we expect to elect under the lease accounting standards update. Our adoption, and the ultimate effect on our consolidated financial statements, will be based on an evaluation of the contract‑specific facts and circumstances. We have determined we have one revenue stream. Although we do not expect material changes to the timing of our revenue recognition relative to current accounting standards, we are still evaluating the allocation of lease and non‑lease components of our revenues and the disclosures that will be contained in our notes to condensed consolidated financial statements. We are continuing to evaluate the requirements and the other effects such requirements may have on our condensed consolidated statements of financial position, operations and cash flows and on the disclosures contained in our notes to condensed consolidated financial statements.

~~Leases~~—Effective no later than January 1, 2019, we will adopt the accounting standards update that (a) requires lessees to recognize a right to use asset and a lease liability for virtually all leases, and (b) updates previous accounting standards for lessors to align certain requirements with the updates to lessee accounting standards and the revenue recognition accounting standards. The update, which permits early adoption, is effective for interim and annual periods beginning after December 15, 2018, including interim periods within those annual periods. Under the updated accounting standards, we have determined that our drilling contracts ~~contain~~with customers that is satisfied over time, the duration of which varies by contract. As of March 31, 2023, the drilling contract with the longest expected remaining duration, excluding unexercised options, extends through July 2029.

Disaggregation—Our contract drilling revenues, disaggregated by asset group and by country in which they were earned, were as follows (in millions):


	Three months ended March 31, 2023						Three months ended March 31, 2022
	Ultra-		Harsh				Ultra-		Harsh
	deepwater		environment				deepwater		environment
	floaters		floaters		Total		floaters		floaters		Total
U.S.	$	352	$	—	$	352	$	268	$	—	$	268
Norway		—		148		148		—		193		193
Other countries (a)		132		17		149		122		3		125
Total contract drilling revenues	$	484	$	165	$	649	$	390	$	196	$	586

(a)The aggregate contract drilling revenues earned in other countries that individually represented less than 10 percent of total contract drilling revenues.

Contract liabilities—Contract liabilities for our contracts with customers were as follows (in millions):


	March 31,		December 31,
	2023		2022
Deferred contract revenues, recorded in other current liabilities	$	145	$	124
Deferred contract revenues, recorded in other long-term liabilities		189		204
Total contract liabilities	$	334	$	328

Significant changes in contract liabilities were as follows (in millions):


	Three months ended
	March 31,
	2023		2022
Total contract liabilities, beginning of period	$	328	$	348
Decrease due to recognition of revenues for goods and services		(34)		(26)
Increase due to goods and services transferred over time		40		15
Total contract liabilities, end of period	$	334	$	337

Pre-operating costs—In the three months ended March 31, 2023 and 2022, we recognized pre-operating costs of $10 million and $12 million, respectively, recorded in operating and maintenance costs. At March 31, 2023 and December 31, 2022, the carrying amount of our unrecognized pre-operating costs to obtain contracts was $52 million and $26 million, respectively, recorded in other assets.

Note 5—Long-Lived Assets

Construction work in progress—The changes in our construction work in progress were as follows (in millions):


	Three months ended
	March 31,
	2023		2022
Construction work in progress, beginning of period	$	1,195	$	1,017

Capital expenditures
Newbuild construction program		65		92
Other equipment and construction projects		16		14
Total capital expenditures		81		106
Changes in accrued capital additions		(4)		(12)

Property and equipment placed into service		(12)		(12)
Construction work in progress, end of period	$	1,260	$	1,099

Disposal—In February 2023, in connection with our investment in a ~~lease component,~~noncontrolling ownership interest in GSR, we made a non-cash contribution of the cold stacked ultra-deepwater floater Ocean Rig Olympia and ~~our adoption, therefore, will require that~~related assets, and in the three months ended March 31, 2023, we ~~separately recognize revenues~~recognized a loss of $169 million ($0.23 per diluted share), which had no tax effect, associated with the lease and services components. Given the interaction with the accounting standards update related to revenue from contracts with customers, we expect to adopt the updates concurrently, effective January 1, 2018. We expect to apply the modified retrospective approach to our adoption, which is consistent with the approach we expect to elect under the revenue accounting standards update. Our adoption, and the ultimate effect on our condensed consolidated financial statements, will be based on an evaluationdisposal of the ~~contract‑specific facts~~rig and circumstances. Although we do not expect material changes to the timing of our revenue recognition relative to current accounting standards, we are still evaluating the allocation of lease and non‑lease components of our revenues and the disclosures that will be contained in our notes to condensed consolidated financial statements. Additionally, based on the lease arrangements under which we are the lessee as of September 30, 2017, we expect to recognize an aggregate lease liability and a corresponding right‑to‑use asset of between $50 million and $70 million. We are continuing to evaluate the requirements with regard to arrangements under which we are the lessor and the other effects such requirements may have on our condensed consolidated statements of financial position, operations and cash flows and on the disclosures contained in our notes to condensed consolidated financial statements.

~~Income taxes~~—Effective no later than January 1, 2018, we will adopt the accounting standards update that requires an entity to recognize the income tax consequences of an intra‑entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring such recognition into future periods. The update, which permits early adoption, is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. We do not expect that our adoption will have a material effect on our condensed consolidated statements of financial position, operations or cash flows or on the disclosures contained in our notes to condensed consolidated financial statements.

~~Statement of cash flows~~—Effective no later than January 1, 2018, we will adopt the accounting standards update that requires amounts generally described as restricted cash or restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning and end of period total amounts presented on the statement of cash flows. The update, which permits early adoption, is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. Aside from presenting the restricted cash and restricted cash equivalents as a component of the beginning and ending cash balances on our condensed consolidated statements of cash flows, we will remove the effect of proceeds from and deposits to restricted accounts from ourrelated assets. See Note 3—Unconsolidated affiliates.

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

cash flows provided by or used in operating and financing activities, as applicable. For the nine months ended September 30, 2017 and 2016, such changes would not have had a material effect on our condensed consolidated statements of cash flows.

~~Retirement benefits~~—Effective no later than January 1, 2018, we will adopt the accounting standards update that requires an employer to disaggregate the service cost component from the other components of net benefit cost related to defined benefit retirement plans and other postemployment benefit plans. The update requires that the service cost component be presented in the same line item as other compensation costs for employees and the other components of net benefit cost in other income and expense on our condensed consolidated statements of operations. The update also allows only the service cost component of net benefit cost to be eligible for capitalization. The update, which permits early adoption, is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We do not expect that our adoption will have a material effect on our condensed consolidated statements of cash flows or on the disclosures contained in our notes to condensed consolidated financial statements.

Note ~~4—Business Combination~~6—Debt

On August 13, 2017, we entered into the Transaction Agreement with Songa pursuant to which we will offer to acquire all of the issued and outstanding shares of Songa. As part of the Offer, we agreed to offer to exchange each of the issued and outstanding shares in Songa for consideration, based on a value of NOK 47.50 per Songa share, consisting of (i) 68.6 million newly issued shares of Transocean Ltd., par value CHF 0.10 per share, and (ii) approximately $575 millionOverview

Outstanding debt—The aggregate principal ~~amount~~amounts and aggregate carrying amounts, including the contractual interest payments of 0.5% Senior Unsecured Exchangeable Bonds to be issued by Transocean Inc. (the “Exchangeable Bonds”) exchangeable into shares of Transocean Ltd. Additionally, each Songa shareholder may elect to receivepreviously restructured debt, a ~~cash payment of NOK 47.50 per Songa share up to a maximum of NOK 125,000 per shareholder in lieu of some or all of the consideration~~bifurcated compound exchange feature, and unamortized debt-related balances, such ~~shareholder would otherwise be entitled to receive in the Offer. The consideration,~~ as ~~presented in the Offer, is based on an equity value of Songa on a fully diluted basis of approximately NOK 9.1 billion~~discounts, premiums and an enterprise value of approximately NOK 26.4 billion, equivalent to approximately $1.2 billion and $3.4 billion, respectively, measured as of the date of the Offer using a currency exchange ratio of NOK 7.9239 to $1.00. We also expect to (i) acquire certain outstanding bonds issued by Songa in exchange for Exchangeable Bonds, and (ii) acquire a $50 million loan made to Songa by one of its shareholders in exchange for Exchangeable Bonds. The consummation of the Offer is subject to the satisfaction of customary closing conditions for transactions of this type.

The Exchangeable Bonds will have an exchange ratio equal to 0.7145 times, determined as of the date of the Offer, based on the market price of $8.39 per Transocean Ltd. share and a currency exchange ratio of NOK 7.9239 to $1.00 . The Exchangeable Bonds will mature five years from the date of issuance. Interest is expected to be paid semiannually at 0.5% per annum.

We expect to complete the transaction before December 31, 2017. If completed, we will account for the transaction using the acquisition method of accounting, pursuant to which we will record the consideration transferred, the assets acquired and the liabilities assumed at fair value, measured as of the acquisition date.

~~Note 5—Variable Interest Entities~~

Angola Deepwater Drilling Company Limited (“ADDCL”), a consolidated Cayman Islands company, is a variable interest entity for which we are the primary beneficiary. The carrying amount of ADDCL, after eliminating the effect of intercompany transactions, wasissue costs, were as follows (in millions):

September 30,

December 31,

2017

2016

Assets

$
764

$
787

Liabilities

14

25

Net carrying amount

$
750

$
762


	Principal amount				Carrying amount
	March 31,		December 31,		March 31,		December 31,
	2023		2022		2023		2022
0.50% Exchangeable Senior Bonds due January 2023	$	—	$	49	$	—	$	49
5.375% Senior Secured Notes due May 2023		—		243		—		242
5.875% Senior Secured Notes due January 2024		—		352		—		350
7.75% Senior Secured Notes due October 2024		—		240		—		238
6.25% Senior Secured Notes due December 2024		—		250		—		248
6.125% Senior Secured Notes due August 2025		—		336		—		332
7.25% Senior Notes due November 2025		354		354		351		351
4.00% Senior Guaranteed Exchangeable Bonds due December 2025		294		294		273		271
7.50% Senior Notes due January 2026		569		569		566		566
2.50% Senior Guaranteed Exchangeable Bonds due January 2027		238		238		262		265
11.50% Senior Guaranteed Notes due January 2027		687		687		973		1,008
6.875% Senior Secured Notes due February 2027		447		482		443		477
8.00% Senior Notes due February 2027		612		612		608		608
7.45% Notes due April 2027		52		52		52		52
8.00% Debentures due April 2027		22		22		22		22
4.50% Shipyard Loans due September 2027		439		439		393		389
8.375% Senior Secured Notes due February 2028		525		—		517		—
7.00% Notes due June 2028		261		261		264		264
4.625% Senior Guaranteed Exchangeable Bonds due September 2029		300		300		576		440
8.75% Senior Secured Notes due February 2030		1,175		—		1,150		—
7.50% Notes due April 2031		396		396		394		394
6.80% Senior Notes due March 2038		610		610		605		605
7.35% Senior Notes due December 2041		177		177		176		176
Total debt		7,158		6,963		7,625		7,347

Less debt due within one year
0.50% Exchangeable Senior Bonds due January 2023		—		49		—		49
5.375% Senior Secured Notes due May 2023		—		243		—		242
5.875% Senior Secured Notes due January 2024		—		83		—		81
7.75% Senior Secured Notes due October 2024		—		60		—		59
6.25% Senior Secured Notes due December 2024		—		62		—		61
6.125% Senior Secured Notes due August 2025		—		66		—		64
2.50% Senior Guaranteed Exchangeable Bonds due January 2027		—		—		6		6
11.50% Senior Guaranteed Notes due January 2027		—		—		71		70
6.875% Senior Secured Notes due February 2027		76		69		74		67
4.50% Shipyard Loans due September 2027		35		20		19		20
8.75% Senior Secured Notes due February 2030		117		—		113		—
Total debt due within one year		228		652		283		719
Total long-term debt	$	6,930	$	6,311	$	7,342	$	6,628

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

~~Note 6—Drilling Fleet~~

~~Construction work in progress~~Scheduled maturities—~~For~~At March 31, 2023, scheduled maturities of our debt, including the ~~nine months ended September 30, 2017 and 2016, the changes in our construction work in progress, including capital expenditures~~principal installments and other ~~capital additions,~~installments, representing the contractual interest payments of previously restructured debt, were as follows (in millions):

Nine months ended

September 30,

2017

2016

Construction work in progress, at beginning of period

$
2,171

$
3,735

Capital expenditures

Newbuild construction program

299

959

Other equipment and construction projects

87

113

Total capital expenditures

386

1,072

Changes in accrued capital additions

(22)

(90)

Construction in progress sold

(289)

—

Property and equipment placed into service

Newbuild construction program

—

(1,672)

Other property and equipment

(66)

(203)

Construction work in progress, at end of period

$
2,180

$
2,842

~~Impairments~~


	Principal		Other
	installments		installments		Total
Twelve months ending March 31,
2024	$	228	$	77	$	305
2025		355		77		432
2026		1,655		78		1,733
2027		2,147		78		2,225
2028		442		—		442
Thereafter		2,331		—		2,331
Total installments of debt	$	7,158	$	310		7,468
Total unamortized debt-related balances, net						(271)
Bifurcated compound exchange feature, at estimated fair value						428
Total carrying amount of debt					$	7,625

Credit agreement

Secured Credit Facility—As of ~~assets held~~March 31, 2023, we have a secured revolving credit facility established under a bank credit agreement (as amended from time to time, the “Secured Credit Facility”), which provides us with borrowing capacity of $774 million through June 22, 2023, which thereafter is reduced to $600 million through its scheduled maturity on June 22, 2025. We may borrow under the Secured Credit Facility at a forward-looking term rate based on the secured overnight financing rate (“Term SOFR”) plus a margin (the “Secured Credit Facility Margin”) and ~~used~~a Term SOFR spread adjustment of 0.10 percent. The Secured Credit Facility is subject to permitted extensions and certain early maturity triggers, including if on any date the aggregate amount of scheduled principal repayments of indebtedness, with certain exceptions, due within 91 days thereof is equal to or in excess of $200 million and available cash is less than $250 million. The Secured Credit Facility permits us to increase the aggregate amount of commitments by up to $250 million. At March 31, 2023, based on the credit rating of the Secured Credit Facility as of that date, the Secured Credit Facility Margin was 3.25 percent and the facility fee was 0.75 percent. At March 31, 2023, we had no borrowings outstanding, $8 million of letters of credit issued, and we had $765 million of available borrowing capacity under the Secured Credit Facility.

Exchangeable bonds

Exchange terms—~~During~~At March 31, 2023, the (a) current exchange rates, expressed as the number of Transocean Ltd. shares per $1,000 note, (b) implied exchange prices per Transocean Ltd. share and (c) aggregate shares, expressed in millions, issuable upon exchange of our exchangeable bonds were as follows:


			Implied
	Exchange		exchange		Shares
	rate		price		issuable
4.00% Senior Guaranteed Exchangeable Bonds due December 2025		190.47620		5.25		56.0
2.50% Senior Guaranteed Exchangeable Bonds due January 2027		162.16260		6.17		38.6
4.625% Senior Guaranteed Exchangeable Bonds due September 2029		290.66180		3.44		87.2

The exchange rates, presented above, are subject to adjustment upon the occurrence of certain events. The 4.00% senior guaranteed exchangeable bonds due December 2025 may be exchanged by holders at any time prior to the close of business on the second business day immediately preceding the maturity date and, at our election, such exchange may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares. The 2.50% senior guaranteed exchangeable bonds due January 2027 (the “2.50% Senior Guaranteed Exchangeable Bonds”) may be exchanged by holders into Transocean Ltd. shares at any time prior to the close of business on the second business day immediately preceding the maturity date or redemption date. The 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”) may be exchanged by holders at any time prior to the close of business on the second business day immediately preceding the maturity date or redemption date and, at our election, such exchange may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares.

Subsequent event—In April 2023, Perestroika (Cyprus) Ltd., an entity affiliated with one of our directors who beneficially owns approximately 11 percent of our shares, exchanged $213 million aggregate principal amount of the 2.50% Senior Guaranteed Exchangeable Bonds, under the terms of the indenture governing such bonds at the applicable exchange rate presented above. As part of the transaction governing the exchange, we delivered 34.6 million Transocean Ltd. shares and additional immaterial cash consideration to such exchanging holder. The director’s beneficial ownership of our shares resulting from these transactions did not change.

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

Effective interest rates and fair values—At March 31, 2023, the effective interest rates and estimated fair values of our exchangeable bonds were as follows (in millions, except effective interest rates):


	Effective		Fair
	interest rate		value
4.00% Senior Guaranteed Exchangeable Bonds due December 2025		6.9%		436
2.50% Senior Guaranteed Exchangeable Bonds due January 2027		0.0%		290
4.625% Senior Guaranteed Exchangeable Bonds due September 2029		18.3%		643

The 4.625% Senior Guaranteed Exchangeable Bonds contain a compound exchange feature that, in addition to the exchange terms outlined above, requires us to pay holders a make-whole premium of future interest through March 30, 2028, for exchanges exercised during a redemption notice period. Such compound exchange feature must be bifurcated from the host debt instrument since it is not considered indexed to our stock. Accordingly, we recognize changes to the estimated fair value of the bifurcated compound exchange feature, recorded as a component of the carrying amount of debt, with a corresponding adjustment to interest expense. In the three months ended ~~June 30, 2017,~~March 31, 2023, we ~~identified indicators that~~recognized an unrealized loss of $133 million as an adjustment to the ~~asset groups in our contract drilling services reporting unit may not be recoverable. Such indicators included recent significant declines in commodity prices and the market~~fair value of ~~our stock, a reduction of projected dayrates~~the bifurcated compound exchange feature. At March 31, 2023 and ~~a further extension of currently low utilization rates. As a result of our testing, we determined that~~December 31, 2022, the carrying amount of the ~~midwater floater asset group~~bifurcated compound exchange feature was ~~impaired. In the nine months ended September 30, 2017, we recognized a loss of $94~~$428 million ~~($95~~and $295 million, after taxes, or $0.25 per diluted share), associated with the impairment of the midwater floater asset group. We measured the fair value of this asset group by applying a combination of income and market approaches, using projected discounted cash flows and estimates of the exchange price that would be received for the assets in the principal or most advantageous markets for the assets in an orderly transaction between participants as of the measurement date. Our estimate of fair value required us to use significant unobservable inputs, representative of a Level 3 fair value measurement, including assumptions related to the future performance of our contract drilling services reporting unit, such as future commodity prices, projected demand for our services, rig availability and dayrates.respectively.

~~Impairments of assets held for sale~~—In the three months ended September 30, 2017, we recognized an aggregate loss of $1.4 billion ($3.54 per diluted share), which had no tax effect, associated with the impairment of the ultra‑deepwater floaters ~~Cajun Express, Deepwater Pathfinder, GSF Jack Ryan, Sedco Energy~~ ~~and~~ ~~Sedco Express~~ ~~and the deepwater floater~~ ~~Transocean Mariana~~s, along with related assets, which were classified as held for sale at the time of impairment. In the nine months ended September 30, 2017, we recognized an aggregate loss of $1.4 billion ($3.60 per diluted share), which had no tax effect, associated with the impairment of the ultra‑deepwater floaters ~~Cajun Express, Deepwater Pathfinder, GSF Jack Ryan, Sedco Energy~~ ~~and~~ ~~Sedco Express,~~ ~~the deepwater floater~~ ~~Transocean Marianas~~ ~~and the midwater floaters~~ ~~Transocean Prospect~~ ~~and~~ ~~Transocean Searcher, along with related assets, which were classified as held for sale at the time of impairment.~~

In the three months ended September 30, 2016, we recognized an aggregate loss of $11 million ($0.03 per diluted share), which had no tax effect, associated with the impairment of the midwater floaters ~~Transocean Driller~~ ~~and~~ ~~Transocean Winner,~~ along with related assets, which were held for sale at the time of impairment. In the nine months ended September 30, 2016, we recognized an aggregate loss of $26 million ($25 million, net of tax, or $0.06 per diluted share) associated with the impairment of the deepwater floater ~~Sedco 702~~ ~~and the midwater floaters~~ ~~Transocean Driller~~, ~~Transocean John Shaw~~ ~~and~~ ~~Transocean Winner, along with related assets, which were classified as held for sale at the time of impairment.~~

~~We measured the impairment of the drilling units and related assets as the amount by which the carrying amount exceeded the estimated fair value less costs to sell.~~ We estimated the fair ~~value~~values of the ~~assets~~exchangeable debt instruments, including the exchange features, by employing a binomial lattice model using significant other observable inputs, representative of Level 2 fair value measurements, including ~~indicative~~the terms and credit spreads of our debt and the expected volatility of the market ~~values~~price for our shares.

Debt issuance

Senior secured notes—In January 2023, we issued $525 million aggregate principal amount of 8.375% senior secured notes due February 2028 (the “8.375% Senior Secured Notes”), and we received $516 million aggregate cash proceeds, net of issue costs. The 8.375% Senior Secured Notes are fully and unconditionally, jointly and severally, guaranteed by Transocean Ltd., Transocean Inc. and the ~~drilling units~~subsidiary owner of the ultra-deepwater floater Deepwater Titan. The 8.375% Senior Secured Notes are secured by the assets and related assets to be sold for scrap value or alternative use. If we commit to plans to sell additional rigs for values below the respective carrying amounts or commit to plans to recycle additional rigs and sell them for scrap value, we may be required to recognize additional lossesearnings associated with the ~~impairment~~collateral rig and the equity of ~~such assets. Such losses could be material.~~the wholly owned subsidiary that owns or operates the collateral rig. Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements. We may redeem all or a portion of the 8.375% Senior Secured Notes on or prior to February 1, 2025 at a price equal to 100 percent of the aggregate principal amount plus a make whole premium, and subsequently, at specified redemption prices.

~~Dispositions—On May 31, 2017, in connection with~~In January 2023, we issued $1.175 billion aggregate principal amount of 8.75% senior secured notes due February 2030 (the “8.75% Senior Secured Notes”), and we received $1.149 billion aggregate cash proceeds, net of issue costs. The 8.75% Senior Secured Notes are fully and unconditionally guaranteed on an unsecured basis by Transocean Ltd. and on a limited senior secured basis by certain of our ~~efforts to dispose of non‑strategic assets, we completed~~wholly owned subsidiaries. The 8.75% Senior Secured Notes are secured by a lien on the ~~sale of 10 high‑specification jackups, including~~ ~~GSF Constellation I, GSF Constellation II, GSF Galaxy I, GSF Galaxy II, GSF Galaxy III, GSF Monarch,~~ ultra-deepwater floaters Deepwater Pontus, Deepwater Proteus and Deepwater Thalassa and the harsh environment floaters Transocean ~~Andaman,~~ Enabler and Transocean ~~Ao Thai, Transocean Honor~~ ~~and~~ ~~Transocean Siam Driller~~Encourage, ~~along with related assets, and novated the contracts relating to the construction of five high‑specification jackups,~~ together with certain related assets. InAdditionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements. We may redeem all or a portion of the ~~nine~~8.75% Senior Secured Notes on or prior to February 15, 2026 at a price equal to 100 percent of the aggregate principal amount plus a make whole premium, and subsequently, at specified redemption prices.

Early debt retirement

During the three months ended ~~September 30, 2017,~~March 31, 2023 and 2022, we ~~received~~redeemed and retired certain notes, for which the aggregate ~~net~~principal amounts, cash ~~proceeds of $319 million~~payments and recognized ~~an aggregate net~~ loss ~~of $1.6 billion~~were as follows (in millions):


	Three months ended
	March 31,
	2023		2022
5.52% Senior Secured Notes due May 2022	$	—	$	18
5.375% Senior Secured Notes due May 2023		243		—
5.875% Senior Secured Notes due January 2024		311		—
7.75% Senior Secured Notes due October 2024		240		—
6.25% Senior Secured Notes due December 2024		250		—
6.125% Senior Secured Notes due August 2025		336		—
Aggregate principal amount of debt retired	$	1,380	$	18

Aggregate cash payment	$	1,402	$	18
Aggregate net loss	$	(32)	$	—

~~- 9 -~~

- 10 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

($4.08 per diluted share), which had no tax effect, associated with the disposal of these assets. Following the completion of the sale, we agreed to continue to operate three of these high‑specification jackups through completion or novation of the respective drilling contracts, one of which was completed as of September 30, 2017. In the three and nine months ended September 30, 2017, excluding our loss on the disposal of these assets, our operating results included income of $19 million and $46 million, respectively, before taxes, associated with the high‑specification jackup asset group. In the three and nine months ended September 30, 2016, our operating results included income of $25 million and $47 million, respectively, before taxes, associated with the high‑specification jackup asset group.

~~During the nine months ended September 30, 2017, we also completed the sale of the midwater floater~~ ~~GSF Rig 140,~~ along with related assets. In the nine months ended September 30, 2017, we received aggregate net cash proceeds of $3 million and recognized an aggregate net gain of $2 million associated with the disposal of these assets. In the three and nine months ended September 30, 2017, we received aggregate net cash proceeds of $1 million and $8 million, respectively, and recognized an aggregate net loss of $9 million and $8 million, respectively, associated with the disposal of assets unrelated to rig sales.

~~During the nine months ended September 30, 2016, in connection with our efforts to dispose of non‑strategic assets, we completed the sale of the deepwater floater~~ ~~Deepwater Navigator~~ ~~and the midwater floaters~~ ~~Falcon 100, GSF Grand Banks, GSF Rig 135,Sedneth 701~~ ~~and~~ ~~Transocean John Shaw~~, along with related assets. In the nine months ended September 30, 2016, we received aggregate net cash proceeds of $11 million, and in the three and nine months ended September 30, 2016, we recognized an aggregate net gain of $3 million and $8 million, respectively, associated with the disposal of these assets. In the three and nine months ended September 30, 2016, we received aggregate net cash proceeds of $1 million and $5 million, respectively, and recognized an aggregate net gain of $6 million and less than $1 million, respectively, associated with the disposal of assets unrelated to rig sales.

~~Assets held for sale—At September 30, 2017, the aggregate carrying amount of our assets held for sale, including the ultra‑deepwater floaters~~ ~~Cajun Express,Deepwater Pathfinder, GSF Jack Ryan, Sedco Energy~~ ~~and~~ ~~Sedco Express,~~ ~~the deepwater floater~~ ~~Transocean Marianas~~ ~~and the midwater floaters~~ ~~Transocean Prospect~~ ~~and~~ ~~Transocean Searcher, along with related assets, was $39 million, recorded in other current assets. At December 31, 2016, the aggregate carrying amount of our assets held for sale, including the midwater floater~~ ~~GSF Rig 140, along with related assets and certain corporate assets, was $6 million, recorded in other current assets.~~

Note 7—Income Taxes

Tax provision and rate—Transocean Ltd., a holding company and Swiss resident, is exempt from cantonal and communal income tax in Switzerland, but is subject to Swiss federal income tax. Our provision for income taxes is based on the tax laws and rates applicable in the jurisdictions in which we operate and earn income. In the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, our ~~estimated~~ effective tax rate ~~excluding discrete items,~~ was ~~64.2~~(12.3) percent and ~~25.9~~(17.6) percent, respectively, based on ~~estimated annual income from continuing operations~~loss before income ~~taxes. Our effective~~ tax ~~rate increased in~~expense. In the ~~nine~~three months ended ~~September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to (a) changes in the relative blend of income from operations in certain jurisdictions~~March 31, 2023 and ~~(b) valuation allowances on deferred tax assets not expected to be realized.~~

We consider the tax effect, if any, of the excluded items as well as settlements of prior year tax estimates to be discrete period tax expenses or benefits. In the nine months ended September 30, 2017 and 2016,2022, the effect of ~~the~~ various discrete period tax items was a net tax benefit of ~~$57~~$11 million and ~~$24~~$8 million, ~~respectively.~~respectively, and the increase of such tax benefit was primarily due to releases of uncertain tax positions in the current-year period. In the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, such discrete items ~~were primarily related to tax benefit~~included expiration of ~~changes in unrecognized tax benefit associated with~~various uncertain tax positions ~~taken in prior years,~~and changes to valuation ~~allowances on deferred tax assets not expected to be realized, and deductions related to resolution of certain litigation matters related to the Macondo well incident.~~allowances. In the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2022, such discrete items ~~were primarily related to~~included expiration of various uncertain tax ~~benefit of changes in unrecognized tax benefit associated with tax positions taken in prior years and valuation allowances on deferred tax assets for losses not expected to be realized. For~~positions. In the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, these discrete tax items, coupled with the excluded income and expense items noted above, resulted in an~~2022, our effective tax rate, ~~of (3.6)~~excluding discrete items, was (29.0) percent and ~~17.8~~(22.8) percent, respectively, based on ~~income from continuing operations~~loss before income tax expense.

~~In evaluating~~Tax positions and returns—We conduct operations through our ~~ability to realize deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses~~various subsidiaries in recent years. As of September 30, 2017, our consolidated cumulative loss incurred over the recent three‑year period, primarily due to losses on impairment and disposal of assets, represented significant objective negative evidence for our evaluation. Such evidence, together with potential organizational changes that could alter our ability to realize certain deferred tax assets, has limited our ability to consider other subjective evidence, such as projected future contract activity. As a result, we recorded a valuation allowance of $144 million to recognize only a portion of our U.S. deferred tax assets that are more likely than not to be recognized. If estimated future taxable income changes during the carryforward periods or if the cumulative loss is no longer present, we may adjust the amount of deferred tax assets that we expect to realize.

~~Tax returns—We file federal and local tax returns in several jurisdictions~~countries throughout the world. ~~With few exceptions, we~~Each country has its own tax regimes with varying nominal rates, deductions and tax attributes that are ~~no longer~~ subject to ~~examinations~~changes resulting from new legislation, interpretation or guidance. From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to adjust our ~~U.S.~~recorded tax assets and non‑U.S. tax matters for years prior to 2010. Our tax returns in the major jurisdictions in which we operate, other than Brazil, as mentioned below, are generally subject to examination for periods ranging from three to six years. We have agreed to extensions beyond the statute of limitations in two major jurisdictions for up to 20 years.liabilities. Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments. We ~~are defending~~intend to defend our tax positions ~~in those~~

~~Table of Contents~~

~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~jurisdictions. While~~vigorously. Although we ~~cannot predict or~~can provide no assurance as to the ~~timing or the~~ outcome of ~~these proceedings,~~the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our condensed consolidated statement of financial position or results of ~~operations, although~~operations; however, it ~~may~~could have a material adverse effect on our condensed consolidated statement of cash flows.

Brazil tax investigations—In December 2005, the Brazilian tax authorities ~~issued a~~began issuing tax ~~assessment~~assessments with respect to our tax returns for the years 2000 through ~~2004, which is currently~~2004. In May 2014, the Brazilian tax authorities issued an additional tax assessment for ~~an aggregate amount of BRL 846 million, equivalent to approximately $267 million, including penalties~~the years 2009 and ~~interest. On January 25, 2008, we~~2010. We filed ~~a protest letter~~protests with the Brazilian tax authorities for ~~this tax assessment,~~the assessments and we are ~~currently~~ engaged in the appeals ~~process. On May 19, 2014,~~process, and a portion of two cases were favorably closed. As of March 31, 2023, the ~~Brazilian tax authorities issued a~~remaining aggregate tax assessment, ~~with respect to our Brazilian~~including interest and penalties, was for corporate income tax ~~returns for the years 2009 and 2010, which is currently for an aggregate amount~~ of BRL ~~144~~675 million, equivalent to approximately ~~$46~~$133 million, ~~including penalties~~ and ~~interest. On June 18, 2014, we filed a protest letter with the Brazilian~~indirect tax ~~authorities for this tax assessment.~~of BRL 72 million, equivalent to approximately $14 million. We believe our returns are materially correct as filed, and we are vigorously contesting these assessments. An unfavorable outcome on these proposed assessments could ~~result in a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.~~

~~Other tax matters~~—We conduct operations through our various subsidiaries in a number of countries throughout the world. Each country has its own tax regimes with varying nominal rates, deductions, employee contribution requirements and tax attributes. From time to time, we may identify changes to previously evaluated tax positions that could result in adjustments to our recorded assets and liabilities. Although we are unable to predict the outcome of these changes, we do not expect the effect, if any, resulting from these adjustments to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.

Note 8—~~Earnings (Loss)~~Loss Per Share

The ~~numerator and denominator used for the~~ computation of basic and diluted loss per share ~~earnings (loss) from continuing operations were~~was as follows (in millions, except per share data):

Three months ended  September 30,

Nine months ended September 30,

2017

2016

2017

2016


Basic

Diluted

Basic

Diluted

Basic

Diluted

Basic

Diluted

Numerator for earnings (loss) per share

Income (loss) from continuing operations attributable to controlling interest

$
(1,417)

$
(1,417)

$
218

$
218

$
(3,016)

$
(3,016)

$
535

$
535

Undistributed earnings allocable to participating securities

—

—

(3)

(3)

—

—

(8)

(9)

Income (loss) from continuing operations available to shareholders

$
(1,417)

$
(1,417)

$
215

$
215

$
(3,016)

$
(3,016)

$
527

$
526

Denominator for earnings (loss) per share

Weighted-average shares outstanding

391

391

365

365

391

391

365

365

Effect of stock options and other share-based awards

—

—

—

—

—

—

—

—

Weighted-average shares for per share calculation

391

391

365

365

391

391

365

365

Per share earnings (loss) from continuing operations

$
(3.62)

$
(3.62)

$
0.59

$
0.59

$
(7.72)

$
(7.72)

$
1.44

$
1.44


	Three months ended
	March 31,
	2023		2022
Numerator for loss per share, basic and diluted
Net loss attributable to controlling interest	$	(465)	$	(175)

Denominator for loss per share, basic and diluted
Weighted-average shares for per share calculation		728		664

Loss per share, basic and diluted	$	(0.64)	$	(0.26)

~~In the three and nine months ended September 30, 2017, we~~

We excluded from the ~~calculation 5.6 million and 4.7 million share‑based awards, respectively, since~~computation certain shares issuable as follows because the effect would have been anti‑dilutive. In the three and nine months ended September 30, 2016, we excluded from the calculation 3.6 million and 2.9 million share‑based awards, respectively, since the effect would have been anti‑dilutive.

~~Table of Contents~~

~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~Note 9—Debt~~

~~Outstanding debt~~—The aggregate principal amounts and aggregate carrying amounts, net of debt‑related balances, including unamortized discounts, premiums and issue costs, of our debt were as follows (in millions):

Principal amount

Carrying amount

September 30,

December 31,

September 30,

December 31,

2017

2016

2017

2016

2.50% Senior Notes due October 2017

$
152

$
485

$
152

$
484

Eksportfinans Loans due January 2018

27

123

27

123

6.00% Senior Notes due March 2018

319

754

319

757

7.375% Senior Notes due April 2018

82

211

82

211

6.50% Senior Notes due November 2020

292

508

295

513

6.375% Senior Notes due December 2021

332

552

330

549

5.52% Senior Secured Notes due May 2022

381

—

375

—

3.80% Senior Notes due October 2022

506

539

501

534

9.00% Senior Notes due July 2023

1,250

1,250

1,215

1,211

7.75% Senior Secured Notes due October 2024

570

600

556

583

6.25% Senior Secured Notes due December 2024

594

625

580

609

7.45% Notes due April 2027

88

88

86

86

8.00% Debentures due April 2027

57

57

57

57

7.00% Notes due June 2028

300

300

307

308

Capital lease contract due August 2029

545

566

545

566

7.50% Notes due April 2031

588

588

585

585

6.80% Senior Notes due March 2038

1,000

1,000

991

991

7.35% Senior Notes due December 2041

300

300

297

297

Total debt

7,383

8,546

7,300

8,464

Less debt due within one year

2.50% Senior Notes due October 2017

152

485

152

484

Eksportfinans Loans due January 2018

27

98

27

98

6.00% Senior Notes due March 2018

319

—

319

—

7.375% Senior Notes due April 2018

82

—

82

—

5.52% Senior Secured Notes due May 2022

77

—

75

—

7.75% Senior Secured Notes due October 2024

60

60

57

57

6.25% Senior Secured Notes due December 2024

63

63

60

60

Capital lease contract due August 2029

27

25

27

25

Total debt due within one year

807

731

799

724

Total long-term debt

$
6,576

$
7,815

$
6,501

$
7,740

~~Interest rate adjustments~~—The interest rates for certain of our notes are subject to adjustment from time to time upon a change to our credit rating of our non‑credit enhanced senior unsecured long‑term debt (“Debt Rating”). As of September 30, 2017, based on the Debt Rating in effect on that date, the interest rate in effect for the 2.50% Senior Notes due October 2017 and the 3.80% Senior Notes due October 2022 was 4.50 percent and 5.80 percent, respectively, and the interest rate in effect for the 6.375% Senior Notes due December 2021 and the 7.35% Senior Notes due December 2041 was 8.375 percent and 9.35 percent, respectively.

~~Five‑Year Revolving Credit Facility~~—In June 2014, we entered into an amended and restated bank credit agreement, which established a $3.0 billion unsecured five‑year revolving credit facility, which is scheduled to expire on June 28, 2019 (the “Five‑Year Revolving Credit Facility”). Among other things, the Five‑Year Revolving Credit Facility includes limitations on creating liens, incurring subsidiary debt, transactions with affiliates, sale/leaseback transactions, mergers and the sale of substantially all assets. The Five‑Year Revolving Credit Facility also includes a covenant imposing a maximum debt to tangible capitalization ratio of 0.6 to 1.0. Borrowings under the Five‑Year Revolving Credit Facility are subject to acceleration upon the occurrence of an event of default. Additionally, such borrowings are guaranteed by Transocean Ltd. and may be prepaid in whole or in part without premium or penalty.

We may borrow under the Five‑Year Revolving Credit Facility at either (1) the adjusted London Interbank Offered Rate plus a margin (the “Five‑Year Revolving Credit Facility Margin”), which ranges from 1.125 percent to 2.0 percent based on the Debt Rating, or (2) the base rate specified in the credit agreement plus the Five‑Year Revolving Credit Facility Margin, less one percent per annum. Throughout the term of the Five‑Year Revolving Credit Facility, we pay a facility fee on the daily unused amount of the underlying commitment which ranges from 0.15 percent to 0.35 percent based on our Debt Rating. At September 30, 2017, based on our Debt Rating on that date, the Five‑Year Revolving Credit Facility Margin was 2.0 percent and the facility fee was 0.35 percent. At September 30, 2017, we had no borrowings outstanding or letters of credit issued, and we had $3.0 billion of available borrowing capacity under the Five‑Year Revolving Credit Facility.

~~Table of Contents~~

~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~Issuance~~—On May 5, 2017, one of our wholly owned subsidiaries completed an offering of an aggregate principal amount of $410 million of 5.52% senior secured notes due May 2022 (the “5.52% Senior Secured Notes”), and our subsidiary received aggregate cash proceeds of $403 million, net of issue costs. On September 29, 2017, our subsidiary made the first of the required quarterly installments of principal and interest. The 5.52% Senior Secured Notes are secured by the assets and earnings associated with the ultra‑deepwater floater ~~Deepwater Conqueror~~, the equity of the wholly owned subsidiaries that own and operate the collateral rig, and certain related assets. Additionally, our subsidiary is required to maintain certain balances in restricted cash accounts. At September 30, 2017, our subsidiary had $95 million deposited in cash accounts restricted for debt service and working capital requirements. Our subsidiary may redeem all or a portion of the 5.52% Senior Secured Notes at any time on or prior to December 31, 2021 at a price equal to 100 percent of the aggregate principal amount plus, subject to certain exceptions related to the drilling contract for ~~Deepwater Conqueror~~, a make‑whole amount. Our subsidiary will be required to redeem or to offer to redeem the notes at a price equal to 100 percent of the aggregate principal amount, and, under certain circumstances, the payment of a make‑whole amount, upon the occurrence of certain events related to ~~Deepwater Conqueror~~ ~~and the related drilling contract.~~

~~See Note 14—Subsequent Events.~~

~~Tender offers~~—On July 11, 2017, we completed cash tender offers to purchase up to $1.5 billion aggregate principal amount of certain notes (the “2017 Tendered Notes”). On August 1, 2016, we completed cash tender offers to purchase up to $1.0 billion aggregate principal amount of certain notes (the “2016 Tendered Notes”). During the nine months ended September 30, 2017 and 2016, we received valid tenders from holders of aggregate principal amounts of the 2017 Tendered Notes and 2016 Tendered Notes as follows (in millions):

Nine months ended

September 30,

2017

2016

2.50% Senior Notes due October 2017

$
271

$
—

6.00% Senior Notes due March 2018

400

—

7.375% Senior Notes due April 2018

128

—

6.50% Senior Notes due November 2020

207

348

6.375% Senior Notes due December 2021

213

476

3.80% Senior Notes due October 2022

—

157

Aggregate principal amount retired

$
1,219

$
981

Aggregate cash payment

$
1,269

$
876

In the three and nine months ended September 30, 2017, we recognized an aggregate net loss of $1 million and $48 million, respectively, associated with the retirement of such validly tendered debt. In the three and nine months ended September 30, 2016, we recognized an aggregate net gain of $104 million associated with the retirement of such validly tendered debt.

~~Repurchases—During the nine months ended September 30, 2017 and 2016, we repurchased in the open market debt securities with aggregate principal amounts as follows (in millions):~~

Nine months ended

September 30,



2017


2016


5.05% Senior Notes due December 2016

$
—

$
36

2.50% Senior Notes due October 2017

62

65

6.00% Senior Notes due March 2018

35

35

7.375% Senior Notes due April 2018

1

26

6.50% Senior Notes due November 2020

9

32

6.375% Senior Notes due December 2021

7

120

3.80% Senior Notes due October 2022

33

38

7.45% Notes due April 2027

—

8

7.50% Notes due April 2031

—

5

Aggregate principal amount retired

$
147

$
365

Aggregate cash payment

$
147

$
320

In the nine months ended September 30, 2017, we recognized an aggregate net loss of $1 million associated with the retirement of such repurchased debt. In the three and nine months ended September 30, 2016, we recognized an aggregate net gain of $6 million and $44 million, respectively, associated with the retirement of such repurchased debt.

~~Table of Contents~~

~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~Note 10—Postemployment Benefit Plans~~

~~The components of net periodic benefit costs, before tax, and funding contributions for our postemployment benefit plans were as follows~~antidilutive (in millions):

Three months ended  September 30, 2017

Three months ended  September 30, 2016

U.S.

Non-U.S.

OPEB

U.S.

Non-U.S.

OPEB


Plans

Plans

Plans

Total

Plans

Plans

Plans

Total

Net periodic benefit costs

Service cost

$
1

$
1

$
—

$
2

$
—

$
3

$
—

$
3

Interest cost

15

3

1

19

18

4

(1)

21

Expected return on plan assets

(19)

(4)

—

(23)

(20)

(6)

—

(26)

Settlements and curtailments

—

1

—

1

—

(5)

2

(3)

Actuarial loss, net

1

1

—

2

1

—

—

1

Prior service cost, net

—

—

(1)

(1)

—

—

(2)

(2)

Net periodic benefit costs

$
(2)

$
2

$
—

$
—

$
(1)

$
(4)

$
(1)

$
(6)

Funding contributions

$
—

$
—

$
1

$
1

$
1

$
1

$
—

$
2


	Three months ended
	March 31,
	2023		2022
Exchangeable bonds		183.3		108.1
Share-based awards		23.8		17.6
Warrants		9.4		—

Nine months ended September 30, 2017

Nine months ended September 30, 2016

U.S.

Non-U.S.

OPEB

U.S.

Non-U.S.

OPEB


Plans

Plans

Plans

Total

Plans

Plans

Plans

Total

Net periodic benefit costs

Service cost

$
3

$
2

$
—

$
5

$
2

$
11

$
—

$
13

Interest cost

48

8

1

57

52

12

—

64

Expected return on plan assets

(56)

(14)

—

(70)

(60)

(18)

—

(78)

Settlements and curtailments

—

6

—

6

1

(6)

—

(5)

Actuarial loss, net

4

1

—

5

3

2

—

5

Prior service cost, net

—

—

(2)

(2)

—

—

(4)

(4)

Net periodic benefit costs

$
(1)

$
3

$
(1)

$
1

$
(2)

$
1

$
(4)

$
(5)

Funding contributions

$
1

$
7

$
2

$
10

$
3

$
41

$
1

$
45

~~Note 11—Commitments and Contingencies~~

Note 9—Contingencies

~~Macondo well incident commitments and contingencies~~

~~Overview—On April 22, 2010, the ultra‑deepwater floater~~ ~~Deepwater Horizon~~ ~~sank after a blowout of the Macondo well caused a fire and explosion on the rig off the coast of Louisiana. At the time of the explosion,~~ ~~Deepwater Horizon~~ was contracted to an affiliate of BP plc (together with its affiliates, “BP”). Following the incident, we have been subject to civil and criminal claims, as well as causes of action, fines and penalties by local, state and federal governments. Litigation commenced shortly after the incident, and most claims against us were consolidated by the U.S. Judicial Panel on Multidistrict Litigation and transferred to the U.S. District Court for the Eastern District of Louisiana (the “MDL Court”). A significant portion of the contingencies arising from the Macondo well incident has now been resolved as a result of settlements with the U.S. Department of Justice (the “DOJ”), BP and the states of Alabama, Florida, Louisiana, Mississippi, and Texas. Additionally, we and the Plaintiff Steering Committee (the “PSC”) entered into a settlement agreement (the “PSC Settlement Agreement”), which was approved by the MDL Court on February 15, 2017.

We have recognized a liability for the remaining estimated loss contingencies associated with litigation resulting from the Macondo well incident that we believe are probable and for which a reasonable estimate can be made. At September 30, 2017 and December 31, 2016, the liability for estimated loss contingencies that we believe are probable and for which a reasonable estimate can be made was $244 million and $250 million, respectively, recorded in other current liabilities. The remaining litigation could result in certain loss contingencies that we believe are reasonably possible. Although we have not recognized a liability for such loss contingencies, these contingencies could result in liabilities that we ultimately recognize.

We recognize an asset associated with the portion of our estimated losses that we believe is probable of recovery from insurance and for which we have received from underwriters’ confirmation of expected payment. Although we have available policy limits that could result in additional amounts recoverable from insurance, recovery of such additional amounts is not probable and we are not currently able to estimate such amounts (see “—Insurance coverage”). Our estimates involve a significant amount of judgment.

~~Plea Agreement~~—Pursuant to the plea agreement (the “Plea Agreement”), one of our subsidiaries pled guilty to one misdemeanor count of negligently discharging oil into the U.S. Gulf of Mexico, in violation of the Clean Water Act and agreed to be subject to probation through February 2018. The DOJ agreed, subject to the provisions of the Plea Agreement, not to further prosecute us

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~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~for certain matters arising from the Macondo well incident. We also agreed to make an aggregate cash payment of $400~~ million, including a criminal fine and cash contributions to the National Fish & Wildlife Foundation and the National Academy of Sciences. At December 31, 2016, the carrying amount of our liability for such settlement obligations was $60 million, recorded in other current liabilities. In the nine months ended September 30, 2017 and 2016, we made cash payments of $60 million in each period, representing the final installments for our obligations under the Plea Agreement.

~~PSC Settlement Agreement~~—On May 29, 2015, together with the PSC, we filed the PSC Settlement Agreement with the MDL Court for approval. Through the PSC Settlement Agreement, we agreed to pay a total of $212 million, plus up to $25 million for partial reimbursement of attorneys’ fees, to be allocated between two classes of plaintiffs as follows: (1) private plaintiffs, businesses, and local governments who could have asserted punitive damages claims against us under general maritime law (the “Punitive Damages Class”); and (2) private plaintiffs who previously settled economic damages claims against BP and were assigned certain claims BP had made against us (the “Assigned Claims Class”). A court‑appointed neutral representative established the allocation of the settlement payment to be 72.8 percent paid to the Punitive Damages Class and 27.2 percent paid to the Assigned Claims Class. In exchange for these payments, each of the classes agreed to release all respective claims it has against us. Members of the Punitive Damages Class were given the opportunity to opt out, and 30 claimants have elected to opt out, of the PSC Settlement Agreement. In June 2016 and August 2015, we made a cash deposit of $25 million and $212 million, respectively, into escrow accounts pending approval of the settlement by the MDL Court. On February 15, 2017, the MDL Court entered a final order and judgement approving the PSC Settlement Agreement, which is no longer subject to appeal. At September 30, 2017 and December 31, 2016, the aggregate cash balance in escrow accounts was $237 million, recorded in restricted cash.

~~Pending claims~~—As of September 30, 2017, numerous complaints remain pending against us, along with other unaffiliated defendants in the MDL Court. We believe our settlement with the PSC resolves many of these pending actions. As for any actions not resolved by these settlements, including any claims by individuals who opted out of the PSC Settlement Agreement, claims by the Mexican government under the Oil Pollution Act of 1990 and maritime law and federal securities law, we are vigorously defending those claims and pursuing any and all defenses available. See “—PSC Settlement Agreement.”

~~Insurance coverage~~—At the time of the Macondo well incident, our excess liability insurance program offered aggregate insurance coverage of $950 million, excluding a $15 million deductible and a $50 million self-insured layer through our wholly owned captive insurance subsidiary. This excess liability insurance coverage consisted of a first and a second layer of $150 million each, a third and fourth layer of $200 million each and a fifth layer of $250 million. We recovered costs under the first four excess layers, the limits of which are now fully exhausted. We submitted claims to the $250 million fifth layer, which is comprised of four Bermuda market insurers (the “Bermuda Insurers”). In the nine months ended September 30, 2017 and the year ended December 31, 2016, we received cash proceeds of $10 million and $20 million, respectively, associated with settlements with two of the Bermuda Insurers. We are in the early stages of arbitration with one of the Bermuda Insurers. We cannot provide assurance that we will successfully recover additional proceeds under the policy limits with the Bermuda Insurers.

~~Other legal~~Legal proceedings

Asbestos litigation—In 2004, several of our subsidiaries were named, along with numerous other unaffiliated defendants, in 21 complaints filed ~~on behalf of 769 plaintiffs~~ in the Circuit Courts of the State of Mississippi, and in 2014, a group of similar complaints were filed in Louisiana. The plaintiffs, former employees of some of the defendants, generally allege that the defendants used or manufactured asbestos containing drilling mud additives for use in connection with drilling operations, claiming negligence, products liability, strict liability and claims allowed under the Jones Act and general maritime law. The plaintiffs generally seek awards of unspecified compensatory and punitive damages, but the ~~court‑~~court appointed special master has ruled that a Jones Act employer defendant, such as us, cannot be sued for punitive damages. ~~At September 30, 2017, 15~~One of our subsidiaries was named in additional complaints filed in Illinois and Missouri, where the plaintiffs similarly allege that the defendants manufactured asbestos containing products or used asbestos-containing drilling mud additives in connection with land-based

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

drilling operations. As of March 31, 2023, six plaintiffs have claims pending in ~~Mississippi~~Louisiana and ~~eight~~nine plaintiffs in the aggregate have claims pending in ~~Louisiana~~either Illinois or Missouri, in which we have or may have an interest. We intend to defend these lawsuits vigorously, although we can provide no assurance as to the outcome. We historically have maintained broad liability insurance, although we ~~are not certain~~can provide no assurance as to whether insurance will cover the liabilities, if any, arising out of these claims. Based on our evaluation of the exposure to date, we do not expect the liability, if any, resulting from these claims to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.

One of our subsidiaries ~~has been~~was named as a defendant, along with numerous other companies, in lawsuits arising out of the subsidiary’s manufacture and sale of heat exchangers, and involvement in the construction and refurbishment of major industrial complexes alleging bodily injury or personal injury as a result of exposure to asbestos. As of ~~September 30, 2017,~~March 31, 2023, the subsidiary was a defendant in approximately ~~123~~235 lawsuits with a corresponding number of plaintiffs. For many of these lawsuits, we have not been provided ~~with~~ sufficient information from the plaintiffs to determine whether all or some of the plaintiffs have claims against the subsidiary, the basis of any such claims, or the nature of their alleged injuries. The operating assets of the subsidiary were sold in 1989. In December 2021, the subsidiary and ~~its operations were discontinued~~certain insurers agreed to a settlement of outstanding disputes that provide the subsidiary with cash. An earlier settlement, achieved in ~~1989,~~September 2018, provided the subsidiary with cash and an annuity that begins making payments in 2024. Together with a coverage in place agreement with certain insurers and additional coverage issued by other insurers, we believe the subsidiary has no remaining assets other than insurance policies, rights and proceeds, including (i) certain policies subject to litigation and (ii) certain rights and proceeds held directly or indirectly through a qualified settlement fund. The subsidiary has in excess of $1.0 billion in insurance limits potentially available to the subsidiary. Although not all of the policies may be fully available due to the insolvency of certain insurers, we believe that the subsidiary will have sufficient ~~funding directly or indirectly,~~

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~including from settlements and payments from insurers, assigned rights from insurers and coverage‑in‑place settlement agreements with insurers~~resources to respond to ~~these claims.~~both the current lawsuits as well as future lawsuits of a similar nature. While we cannot predict or provide assurance as to the outcome of these matters, we do not expect the ultimate liability, if any, resulting from these claims to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.

~~Rio de Janeiro tax assessment~~—In the year ended December 31, 2006, the state tax authorities of Rio de Janeiro in Brazil issued to one of our subsidiaries tax assessments on equipment imported into the state in connection with our operations, resulting from a preliminary finding by these authorities that our record keeping practices were deficient. At September 30, 2017, the aggregate tax assessment was for BRL 525 million, equivalent to approximately $166 million, including interest and penalties. In September 2006, we filed an initial response refuting these tax assessments, and, in September 2007, the state tax authorities confirmed that they believe the tax assessments are valid. On September 27, 2007, we filed an appeal with the state Taxpayer’s Council contesting the assessments. While we cannot predict or provide assurance as to the final outcome of these proceedings, we do not expect it to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.

~~Nigerian Cabotage Act litigation~~—In October 2007, three of our subsidiaries were each served a Notice and Demand from the Nigeria Maritime Administration and Safety Agency, imposing a two percent surcharge on the value of all contracts performed by us in Nigeria pursuant to the Coastal and Inland Shipping (Cabotage) Act 2003 (the “Cabotage Act”). Our subsidiaries each filed an originating summons in the Federal High Court in Lagos challenging the imposition of this surcharge on the basis that the Cabotage Act and associated levy is not applicable to drilling rigs. The respondents challenged the competence of the suits on several procedural grounds. The court upheld the objections and dismissed the suits. In December 2010, our subsidiaries filed a new joint Cabotage Act suit. While we cannot predict or provide assurance as to the outcome of these proceedings, we do not expect the proceedings to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.

Other matters—We are involved in ~~various tax matters,~~ various regulatory matters and a number of claims and lawsuits, asserted and unasserted, all of which have arisen in the ordinary course of our business. We do not expect the liability, if any, resulting from these other matters to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows. We cannot predict with certainty the outcome or effect of any of the litigation matters specifically described above or of any such other pending, threatened, or possible litigation or liability. We can provide no assurance that our beliefs or expectations as to the outcome or effect of any ~~tax,~~ regulatory, lawsuit or other litigation matter will prove correct, and the eventual outcome of these matters could materially differ from management’s current estimates.

~~Other environmental~~Environmental matters

~~Hazardous waste disposal sites~~—We have certain potential liabilities under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state acts regulating cleanup of hazardous substances at various ~~hazardous~~ waste disposal sites, including those described below. CERCLA is intended to expedite the remediation of hazardous substances without regard to fault. Potentially responsible parties (“PRPs”) for each site include present and former owners and operators of transporters to and generators of the substances at the site. It is difficult to quantify the potential cost of environmental matters and remediation obligations. Liability is strict and can be joint and several.

~~We have been~~One of our subsidiaries was named as a PRP in connection with a site located in Santa Fe Springs, California, known as the Waste Disposal, Inc. site. We and other PRPs ~~have~~ agreed, under a participation agreement with the U.S. Environmental Protection Agency (the “EPA”) and the ~~DOJ~~U.S. Department of Justice, to settle our potential liabilities by remediating the site. The remedial action for ~~this~~the site by agreeing to perform the remaining remediation required by the EPA. The parties to the settlement have entered into a participation agreement, which makes us liable for approximately eight percent of the remediation and related costs. The remediation is complete, and we believe ourwas completed in 2006. Our share of the ~~future operation~~ongoing operating and maintenance costs ~~of the site is~~has been insignificant, and we do not ~~material. There are~~expect any additional potential liabilities ~~related~~ to ~~the site, but these cannot be quantified, and we have no reason at this time to believe that they will~~ be material.

One of our subsidiaries has been ordered by the California Regional Water Quality Control Board (“CRWQCB”) to develop a testing plan for a site known as Campus 1000 Fremont in Alhambra, California, which is now a part of the San Gabriel Valley, Area 3, Superfund site. We were also advised that one or more of our subsidiaries that formerly owned and operated the site would likely be named by the EPA as PRPs. The current property owner, an unrelated party, performed the required testing and detected no contaminants. In discussions with CRWQCB staff, we were advised of their intent to issue us a “no further action” letter, but it has not yet been received. Based on the test results, we would contest any potential liability. We have no knowledge at this time of the potential cost of any remediation, who else will be named as PRPs, and whether in fact any of our subsidiaries is a responsible party. The subsidiaries in question do not own any operating assets and have limited ability to respond to any liabilities.

Resolutions of other claims by the EPA, the involved state agency or PRPs are at various stages of investigation. These investigations involve determinations of (a) the actual responsibility attributed to us and the other PRPs at the site, (b) appropriate investigatory or remedial actions and (c) allocation of the costs of such activities among the PRPs and other site users. Our ultimate financial responsibility in connection with those sites may depend on many factors, including (i) the volume and nature of material, if any, contributed to the site for which we are responsible, (ii) the number of other PRPs and their financial viability and (iii) the remediation methods and technology to be used.

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~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~It is difficult to quantify with certainty the potential cost of these environmental matters, particularly in respect of remediation obligations.~~ Nevertheless, based ~~upon the~~on available information ~~currently available, we believe that our ultimate liability arising from~~with respect to all environmental matters, including ~~the liability for~~ all ~~other~~ related pending legal proceedings, asserted legal claims and known potential legal claims that are likely to be asserted, ~~is adequately accrued and should~~we do not expect the ultimate liability, if any, resulting from such matters to have a material adverse effect on our condensed consolidated statement of financial position, or results of ~~operations.~~operations or cash flows.

Note ~~12—Shareholders’~~ 10—Equity

~~Par value reduction~~Share issuance—~~On October 29, 2015, at our extraordinary general meeting, our shareholders approved~~In 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 reduction of par value became effective as of January 7, 2016, upon registration in the commercial register.

~~Shares held in treasury~~—In May 2009, at our annual general meeting, our shareholders approved and authorized our board of directors, at its discretion, to repurchase an amount of our shares for cancellation with an aggregate purchase price of up to CHF 3.5 billion, equivalent to approximately $3.6 billion. On February 12, 2010, our board of directors authorized our management to implement the share repurchase program. During the ninethree months ended ~~September 30, 2017 and 2016,~~March 31, 2022, we ~~did not purchase any~~received aggregate cash proceeds of $103 million, net of issue costs, for the aggregate sale of 20.2 million shares under ~~our share repurchase~~the at-the-market equity offering program. ~~On October 29, 2015, at our extraordinary general meeting, our shareholders approved the cancellation~~

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Table of the 2.9 million shares previously purchased under the share repurchase program and held in treasury. The cancellation of such shares became effective as of January 7, 2016, upon registration in the commercial register.Contents

~~Shares held by subsidiaries~~—Two of our subsidiaries hold our shares for future use to satisfy our obligations to deliver shares in connection with awards granted under our incentive plans or other rights to acquire our shares. At September 30, 2017 and December 31, 2016, our subsidiaries held 3.6 million shares and 5.4 million shares, respectively.TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

Note ~~13—~~11—Financial Instruments

Overview—The carrying amounts and fair values of our financial instruments were as follows (in millions):

September 30, 2017

December 31, 2016

Carrying

Fair

Carrying

Fair


amount

value

amount

value

Cash and cash equivalents

$
2,717

$
2,717

$
3,052

$
3,052

Restricted cash accounts and investments

503

503

510

511

Long-term debt, including current maturities

7,300

7,415

8,464

8,218

~~We estimated the fair value of each class of financial instruments, for which estimating fair value is practicable, by applying the following methods and assumptions:~~


	March 31, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Cash and cash equivalents	$	747	$	747	$	683	$	683
Restricted cash and cash equivalents		208		208		308		308
Long-term loans receivable from unconsolidated affiliates		41		43		41		43
Total debt		7,625		7,208		7,347		6,412

Cash and cash equivalents—Our cash and cash equivalents are primarily invested in demand deposits, short-term time deposits and money market funds. The carrying amount of our cash and cash equivalents represents the historical cost, plus accrued interest, which approximates fair value because of the short maturities of ~~those~~the instruments. We measured the estimated fair value of our cash equivalents using significant other observable inputs, representative of a Level 2 fair value measurement, including the net asset values of the investments. At September 30, 2017 and December 31, 2016, the aggregate carrying amount of our cash equivalents was $2.2 billion and $2.6 billion, respectively.

Restricted ~~cash accounts and investments~~~~—The carrying amount of the~~ cash and cash equivalents ~~that~~—Our restricted cash and cash equivalents, which are subject to restrictions due to collateral requirements, legislation, regulation or court order, ~~approximates fair value due to the short term nature of the instruments~~are primarily invested in ~~which the restricted cash balances are held. At September 30, 2017, the aggregate~~demand deposits and money market funds. The carrying amount of ~~such~~our restricted cash and cash equivalents ~~was $476 million, including $453 million and $23 million recorded in current assets and other long‑term assets, respectively. At December 31, 2016,~~represents the ~~aggregate carrying amount~~historical cost, plus accrued interest, which approximates fair value because of ~~such restricted cash and cash equivalents was $387 million, including $368 million and $19 million recorded in current assets and other long‑term assets, respectively.~~the short maturities of the instruments.

Long-term loans receivable from unconsolidated affiliates—The carrying amount of our long-term loans receivable from unconsolidated affiliates, recorded in other assets, represents the ~~restricted cash investments pledged for debt service~~principal amount of the ~~Eksportfinans Loans due January 2018 and for security of certain other credit arrangements represents the amortized historical cost of the~~cash investment. We ~~measured~~estimated the ~~estimated~~ fair value of ~~such restricted cash investments~~our long-term loans receivable from unconsolidated affiliates using significant ~~other observable~~unobservable inputs, representative of a Level 23 fair value ~~measurement,~~measurements, including the terms and credit spreads offor the instruments. ~~At September 30, 2017 and December 31, 2016, the aggregate~~

Total debt—The carrying amount of our total debt represents the ~~restricted cash investments was $27 million~~principal amount, contractual interest payments of previously restructured debt and ~~$123 million, respectively. At September 30, 2017~~unamortized discounts, premiums and ~~December 31, 2016, the estimated fair value of such restricted cash investments was $27 million~~issue costs. The carrying amount and ~~$124 million, respectively.~~

~~Debt—We measured the estimated~~ fair value of our total debt ~~all~~includes amounts related to certain exchangeable debt instruments (see Note 6—Debt). We estimated the fair value of ~~which was fixed‑rate~~our total debt using significant other observable inputs, representative of a Level 2 fair value ~~measurement,~~measurements, including the terms and credit spreads for the ~~instruments.~~instruments and, with respect to the exchangeable debt instruments, the expected volatility of the market price for our shares.

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~~TRANSOCEAN LTD. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued~~

~~(Unaudited)~~

~~Note 14—Subsequent events~~

~~Debt issuance~~—On October 17, 2017, we completed an offering of an aggregate principal amount of $750 million of 7.50% senior unsecured notes due January 15, 2026 (the “7.50% Senior Notes”), and we received aggregate cash proceeds of $742 million, net of issue costs. We intend to use the majority of the net proceeds from the debt offering to repay or redeem certain maturing debt. The 7.50% Senior Notes are fully and unconditionally guaranteed by Transocean Ltd. and certain wholly owned subsidiaries of Transocean Inc. Such notes rank equal in right of payment to all of our existing and future unsecured unsubordinated obligations and rank structurally senior to the extent of the value of the assets of the subsidiaries guaranteeing the notes. We will pay interest on the 7.50% Senior Notes semiannually on January 15 and July 15 of each year, beginning on July 15, 2018. We may redeem all or a portion of the 7.50% Senior Notes at any time prior to January 15, 2021 at a price equal to 100 percent of the aggregate principal amount plus a make‑whole provision, and on or after January 15, 2021, at specified redemption prices. The indenture that governs the 7.50% Senior Notes contains covenants that, among other things, limit our ability to incur certain liens on our drilling units without equally and ratably securing the notes, engage in certain sale and lease‑back transactions covering any of our drilling units, allow our subsidiaries to incur certain additional debt, and consolidate, merge or enter into a scheme of arrangement qualifying as an amalgamation.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Forward‑Looking~~Forward-Looking Information

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

~~our results of operations and cash flow from operations, including revenues, revenue efficiency, costs and expenses;~~

◾the effect, impact, potential duration, the scale of any economic disruptions or other implications of COVID-19, including virus variants;

the offshore drilling market, including the effects of declines in commodity prices, supply and demand, utilization rates, dayrates, customer drilling programs, stacking of rigs, reactivation of rigs, effects of new rigs on the market, the impact of enhanced regulations in the jurisdictions in which we operate and changes in the global economy or market outlook for our various geographical operating sectors and classes of rigs;

◾the effect of any disputes and actions with respect to production levels by, among or between major oil and gas producing countries and any expectations we may have with respect thereto;

customer drilling contracts, including contract backlog, force majeure provisions, contract commencements, contract extensions, contract terminations, contract option exercises, contract revenues, early termination payments, indemnity provisions, contract awards and rig mobilizations;

◾our results of operations, our cash flow from operations, our revenue efficiency and other performance indicators and optimization of rig-based spending;

~~liquidity and adequacy of cash flows for our obligations;~~

◾the offshore drilling market, including the effects of variations in commodity prices, supply and demand, utilization rates, dayrates, customer drilling programs, stacking and reactivation of rigs, effects of new rigs on the market, the impact of changes to regulations in jurisdictions in which we operate and changes in the global economy or market outlook for our industry, our rig classes or the various geographies in which we operate;

the expected timing and likelihood of completion of the proposed acquisition of Songa Offshore SE, a European public company limited by shares, or societas Europaea, existing under the laws of Cyprus (“Songa”), including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the contemplated transaction that could reduce anticipated benefits or cause the parties to abandon the transaction, the possibility that our shareholders may not approve certain matters that are conditions to the offer to acquire all of the issued and outstanding shares of Songa through a public voluntary exchange offer (the “Offer”) or that the requisite number of Songa shares may not be exchanged in the public Offer and the risk that the parties may not be able to satisfy the conditions to closing of the Offer in a timely manner or at all;

◾customer drilling contracts, including contract backlog, force majeure provisions, contract awards, commencements, extensions, terminations, renegotiations, contract option exercises, contract revenues, early termination fees, indemnity provisions and rig mobilizations;

~~the occurrence of any event, change or other circumstances that could give rise to the termination of the transaction agreement (the “Transaction Agreement”) for the Songa acquisition;~~

◾the addition of renewable or other energy alternatives to meet local, regional or global demand for energy, the commitment, by us or our customers, to reduce greenhouse gas emissions or intensity thereof;

~~our ability to successfully complete the Songa acquisition, including the related exchange offers;~~

◾liquidity, including availability under our bank credit agreement, and adequacy of cash flows for our obligations;

~~regulatory or other limitations imposed as a result of the Songa acquisition;~~

◾debt levels, including interest rates, credit ratings and our evaluation or decisions with respect to any potential liability management transactions or strategic alternatives intended to prudently manage our liquidity, debt maturities and other aspects of our capital structure and any litigation, alleged defaults and discussions with creditors related thereto;

~~the success of our business following completion of the Songa acquisition;~~

◾newbuild, upgrade, shipyard and other capital projects, including the level of expected capital expenditures and the timing and cost of completing capital projects, delivery and operating commencement dates, relinquishment or abandonment, expected downtime and lost revenues;

~~the ability to successfully integrate our business with the Songa business;~~

◾the cost and timing of acquisitions and the proceeds and timing of dispositions;

~~risks related to diversion of management time and attention from ongoing business operations due to the purposed Songa acquisition;~~

◾tax matters, including our effective tax rate, changes in tax laws, treaties and regulations, tax assessments, tax incentive programs and liabilities for tax issues in the tax jurisdictions in which we operate or have a taxable presence;

the risk that the announcement of completion of the Songa acquisition could have adverse effects on the market price of our or Songa’s shares or the ability of us or Songa to retain customers, retain or hire key personnel, maintain relationships with their respective suppliers and customers, and on their operating results and businesses generally;

◾legal and regulatory matters, including results and effects of current or potential legal proceedings and governmental audits and assessments, outcomes and effects of internal and governmental investigations, customs and environmental matters;

~~the risk that we may be unable to achieve expected synergies from our acquisition of Songa or that it may take longer or be more costly than expected to achieve those synergies;~~

◾insurance matters, including adequacy of insurance, renewal of insurance, insurance proceeds and cash investments of our wholly owned captive insurance company;

~~debt levels, including impacts of a financial and economic downturn, and interest rates;~~

◾effects of accounting changes and adoption of accounting policies; and

newbuild, upgrade, shipyard and other capital projects, including completion, delivery and commencement of operation dates, expected downtime and lost revenue, the level of expected capital expenditures and the timing and cost of completion of capital projects;

◾investment in recruitment, retention and personnel development initiatives, the timing of, and other matters concerning, severance payments and benefit payments.

~~effects of remediation efforts to address the material weakness discussed in “Item 4. Controls and Procedures”;~~

t~~he cost and timing of acquisitions and the proceeds and timing of dispositions;~~

~~the optimization of rig‑based spending;~~

tax matters, including our effective tax rate, changes in tax laws, treaties and regulations, tax assessments and liabilities for tax issues, including those associated with our activities in Brazil, Nigeria, the United Kingdom (“U.K.”) and the U.S.;

legal and regulatory matters, including results and effects of legal proceedings and governmental audits and assessments, outcomes and effects of internal and governmental investigations, customs and environmental matters;

~~insurance matters, including adequacy of insurance, renewal of insurance, insurance proceeds and cash investments of our wholly owned captive insurance company;~~

~~effects of accounting changes and adoption of accounting policies; and~~

~~investment in recruitment, retention and personnel development initiatives, pension plan and other postretirement benefit plan contributions, the timing of severance payments and benefit payments.~~

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

◾

~~“anticipates”~~anticipates

◾

~~“could”~~budgets

◾

~~“forecasts”~~estimates

◾

~~“might”~~forecasts

◾

~~“projects”~~may

◾

plans

◾

projects

◾

should

◾

~~“believes”~~believes

◾

could

◾

expects

◾

intends

◾

might

◾

predicts

◾

scheduled

~~“estimates”~~

~~“intends”~~

~~“plans”~~

~~“scheduled”~~

~~“budgets”~~

~~“expects”~~

~~“may”~~

~~“predicts”~~

~~“should”~~

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

~~those~~ ~~described~~ ~~under “Item 1A. Risk Factors” included in Part I of our annual report on Form 10‑K for the year ended December 31, 2016 and in Part II of this quarterly report;~~

◾those described under “Item 1A. Risk Factors” included in Part I of our annual report on Form 10-K for the year ended December 31, 2022;

~~the adequacy of and access to sources of liquidity;~~

◾the effects of public health threats, pandemics and epidemics, such as the outbreak of COVID-19, and the adverse impact thereof on our business, financial condition and results of operations, including, but not limited to, our growth, operating costs, supply chain, labor availability, logistical capabilities, customer demand for our services and industry demand generally, our liquidity, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally;

~~our inability to obtain drilling contracts for our rigs that do not have contracts;~~

◾the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries and other oil and natural gas producing countries with respect to production levels or other matters related to the prices of oil and natural gas;

~~our inability to renew drilling contracts at comparable dayrates;~~

◾the adequacy of and access to our sources of liquidity;

~~operational performance;~~

◾our inability to renew drilling contracts at comparable, or improved, dayrates and to obtain drilling contracts for our rigs that do not have contracts;

~~the cancellation of drilling contracts currently included in our reported contract backlog;~~

◾operational performance;

~~the effectiveness of our remediation efforts with respect to the material weakness discussed in “Item 4. Controls and Procedures”;~~

◾the cancellation of drilling contracts currently included in our reported contract backlog;

~~losses on impairment of long‑lived assets;~~

◾losses on impairment of long-lived assets;

~~shipyard, construction and other delays;~~

◾shipyard, construction and other delays;

~~the results of meetings of our shareholders;~~

◾the results of meetings of our shareholders;

~~changes in political, social and economic conditions;~~

◾changes in political, social and economic conditions;

~~the effect and results of litigation, regulatory matters, settlements, audits, assessments and contingencies; and~~

◾the effect and results of litigation, regulatory matters, settlements, audits, assessments and contingencies; and

~~other factors discussed in this quarterly report and in our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC website at~~ ~~www.sec.gov~~.

◾other factors discussed in this quarterly report and in our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC website at www.sec.gov.

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~~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~~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~~forward-looking statements. Each ~~forward‑looking~~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~~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~~forward-looking statement is based, except as required by ~~law.~~law.

Table of Contents

Business

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells. As of ~~October 24, 2017,~~April 25, 2023, we owned or had partial ownership interests in and operated 3937 mobile offshore drilling units, ~~including 26 ultra‑deepwater~~consisting of 27 ultra-deepwater floaters ~~seven~~and 10 harsh environment ~~floaters, two deepwater floaters and four midwater~~ floaters. Additionally, as of April 25, 2023, we ~~operated two high‑specification jackups~~were constructing one ultra-deepwater drillship and held a noncontrolling ownership interest in a company that were under contract when we sold the rigs, and we continue to operate such rigs until completion or novation of the respective drilling contracts. At October 24, 2017, we also had three ultra‑deepwater drillships under construction or under contract to be constructed. See “—Significant Events.”is constructing one ultra-deepwater drillship.

We provide, as our primary business, contract drilling services in a single ~~global~~ operating segment, which involves contracting our mobile offshore drilling ~~fleet,~~rigs, related equipment and work crews ~~primarily 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 ~~ultra‑deepwater~~ultra-deepwater and harsh environment drilling services. ~~We believe our~~Our drilling fleet is one of the most versatile fleets in the world, consisting of ~~drillship~~drillships and semisubmersible floaters used in support of offshore drilling activities and offshore support services on a worldwide basis.

~~Our~~We perform contract drilling services ~~operations are~~by deploying our high-specification fleet in a single, global market that is geographically dispersed in oil and gas exploration and development areas throughout the world. Although rigs can be moved from one region to another, the cost of moving rigs and the availability of ~~rig‑moving~~rig-moving vessels may cause the supply and demand balance to fluctuate somewhat between regions. Still, significant variations between regions do not tend to persist long term because of rig mobility. ~~Our fleet operates in a single, global market for the provision of contract drilling services.~~ The location of our rigs and the allocation of resources to operate, build or upgrade our rigs are determined by the activities and needs of our customers.

Significant Events

~~Business combination~~Secured debt issuance—~~On August 13, 2017,~~In January 2023, we ~~entered into the Transaction Agreement with Songa pursuant to which~~issued $525 million aggregate principal amount of 8.375% senior secured notes due February 2028 (the “8.375% Senior Secured Notes”), and we ~~will offer to acquire all~~received $516 million aggregate cash proceeds, net of ~~the~~issue costs. In January 2023, we issued $1.175 billion aggregate principal amount of 8.75% senior secured notes due February 2030 (the “8.75% Senior Secured Notes”), and ~~outstanding shares~~we received $1.149 billion aggregate cash proceeds, net of Songa, subject to certain conditions, through the Offer. At October 24, 2017, Songa owned and operated seven mobile offshore drillings units, including four harsh environment floaters and three midwater floaters.issue costs. See ~~Notes to Condensed Consolidated Financial Statements—Note 4—Business Combination and~~ “—Liquidity and Capital Resources—Sources and uses of ~~liquidity.~~liquidity.”

~~Fleet expansion~~Early debt retirement—In January 2023, in connection with the issuance of the 8.75% Senior Secured Notes, we made an aggregate payment of $1.156 billion, including a make-whole premium, to redeem the remaining outstanding $311 million, $240 million, $250 million, and $336 million aggregate principal amount of the 5.875% senior secured notes due January 2024 (the “5.875% Senior Secured Notes”), the 7.75% senior secured notes due October ~~2017,~~2024 (the “7.75% Senior Secured Notes”), the 6.25% senior secured notes due December 2024 (the “6.25% Senior Secured Notes”) and the 6.125% senior secured notes due August 2025 (the “6.125% Senior Secured Notes”), respectively. In the three months ended March 31, 2023, we ~~completed construction~~made a cash payment of ~~and placed into service~~$243 million to redeem an equivalent aggregate principal amount of the ~~ultra‑deepwater floater~~ ~~Deepwater Pontus~~outstanding 5.375% senior secured notes due May 2023 (the “5.375% Senior Secured Notes”). See “—Liquidity and Capital Resources—~~Drilling fleet.~~Sources and uses of liquidity.”

~~Drilling contract termination~~Asset disposal and investment in unconsolidated affiliate—In ~~September 2017,~~February 2023, we ~~received notice from one~~made a cash contribution of ~~our customers that it elected to exercise its contractual option to terminate the drilling contract for the ultra‑deepwater drillship~~ ~~Discoverer Clear Leader, effective November 2017, prior to its previously agreed expiration in October 2018. As~~$10 million and a ~~result~~non-cash contribution of the ~~early termination, we expect to receive approximately $148~~ultra-deepwater floater Ocean Rig Olympia, and related assets, with an estimated fair value of $85 million, in ~~termination fees. See “—Performance and Other Key Indicators.”~~

~~- 20 -~~

~~Table of Contents~~

~~Dispositions—On May 31, 2017, we completed the sale of 10 high‑specification jackups and novated the contracts relating to the construction of five high‑specification jackups, together~~exchange for a noncontrolling ownership interest in Global Sea Mineral Resources NV (together with ~~related assets.~~its subsidiaries, “GSR”). In the ~~nine~~three months ended ~~September 30, 2017, as~~March 31, 2023, we recognized a ~~result of the transaction, we received aggregate net cash proceeds of $319 million and recognized an aggregate net~~ loss of ~~$1.6 billion~~$169 million, associated with the disposal of ~~these~~the rig and related assets. See “—Operating ~~Results” and “—Liquidity~~Results,” “Liquidity and Capital Resources—~~Drilling Fleet.”~~

~~Impairments~~—During the nine months ended September 30, 2017, we recognized a loss of $1.4 billion associated with the impairment of five ultra‑deepwater floaters, one deepwater floater and two midwater floaters, along with related assets, which were classified as held for sale at the time of impairment. See “—Operating Results” and “—Liquidity and Capital Resources—Drilling Fleet.”

During the three months ended June 30, 2017, we identified indicators that the asset groups in our contract drilling services reporting unit may not be recoverable. As a result of our testing, we determined that the carrying amount of the midwater floater asset group was impaired. In the nine months ended September 30, 2017, we recognized a loss of $94 million, associated with the impairment of the midwater floater asset group. See “—Operating Results.”

~~Debt issuances~~—On October 17, 2017, we completed an offering of an aggregate principal amount of $750 million of 7.50% senior unsecured notes due January 2026 (the “7.50% Senior Notes”), and we received aggregate cash proceeds of $742 million, net of issue costs. We intend to use the majority of the net proceeds from the debt offering to repay or redeem certain maturing debt. See “—Liquidity and Capital Resources—Sources and uses of ~~liquidity.~~liquidity”

On May 5, 2017, our wholly owned subsidiary completed an offering of an aggregate principal amount of $410 million of 5.52% senior secured notes due May 2022 (the “5.52% Senior Secured Notes”), and ~~our subsidiary received aggregate cash proceeds of $403 million, net of issue costs. See “—Liquidity~~“Liquidity and Capital Resources—~~Sources and uses of liquidity.”~~

~~Debt retirements—On July 11, 2017, we completed cash tender offers (the “2017 Tender Offers”) to purchase up to $1.5 billion aggregate principal amount of certain notes (the “2017 Tendered Notes”)~~Drilling fleet. We received valid tenders from holders of $1.2 billion aggregate principal amount of the 2017 Tendered Notes. As a result, we made an aggregate cash payment of $1.3 billion and recognized an aggregate net loss of $48 million associated with the retirement of such debt, validly tendered on or before the expiration date of the 2017 Tender Offers. See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

During the nine months ended September 30, 2017, we completed transactions to repurchase in the open market an aggregate principal amount of $147 million of our debt securities for an aggregate cash payment of $147 million. As a result, in the nine months ended September 30, 2017, we recognized an aggregate net loss of $1 million associated with the retirement of such repurchased debt. See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Outlook

Drilling market—Our ~~long‑term view~~industry outlook is positive based upon several fundamental factors, including the increased global demand for hydrocarbons combined with a diminishing global supply, the latter being the result of the natural decline in production of existing oil and gas fields compounded by the significant underinvestment in reserve replacement by oil and gas producers, and additional constraints imposed on industry participants by the governments of oil and gas producing nations as well as investors. Additionally, the Russian invasion of Ukraine and the related economic sanctions highlighted the criticality of energy reliability and security across Europe, the U.S. and elsewhere. Due to these and other factors, oil prices have increased materially over the past two years.

Although the price for both prompt and longer-dated barrels continues to exhibit volatility reflecting market concerns about inflationary trends, economic recession and the potential for demand destruction, prices are, and are expected to remain, at levels that are robustly supportive of investment in deepwater and harsh environment exploration and development projects. Additionally, rig attrition resulting from significantly reduced offshore contracting activity over the last several years has resulted in a much smaller global fleet of floating rigs that is available to meet customer demands, specifically with respect to the highest specification drilling units required by many of our customers for their projects. Consequently, our outlook for the offshore drilling ~~market~~industry overall remains positive, ~~especially~~particularly for high-specification drilling assets, such as those we own and operate.

Our customers continue to invest in deepwater and harsh environment offshore projects as evidenced by the restarting of delayed projects, commencement of new drilling campaigns and extensions of current drilling campaigns. Licensing activity has also increased as energy companies look to explore and develop new prospects. This has resulted in more tendering activity during the last half of 2022 and

- 15 -

Table of Contents

into 2023. Several multi-year tenders for work in Brazil, West Africa, Asia and Australia are expected to be awarded in the first nine months of 2023.

Offshore drilling activity is increasing or remain robust in every ultra-deepwater geographic sector. South America, the Gulf of Mexico and, increasingly, Africa remain key ultra-deepwater market sectors. In 2022, we observed significant increases in dayrates for projects in the U.S. Gulf of Mexico and, particularly, in Brazil. These trends are expected to continue. In Norway, the largest market for harsh environment rigs, we forecast that only a limited number of new projects will commence before the end of 2023 but anticipate demand for rigs in this market sector will accelerate thereafter through 2026 due to previously enacted Norwegian tax incentive programs. Rigs in the region are becoming increasingly scarce as approximately eight rigs have or are currently expected to depart the Norwegian Continental Shelf in the coming 12 months for projects being advanced in various countries, including the United Kingdom, Namibia and ~~ultra‑deepwater floaters. In recent months, oil prices have stabilized at about $50 per barrel~~Australia that require high-specification, harsh environment semisubmersibles. Given the limited number of rigs that are qualified to operate in the Norwegian Continental Shelf, we anticipate that these departures will create a deficit of rig supply by 2025, which, in the context of the anticipated increases in demand, will accelerate dayrate increases for the assets remaining in the region.

We expect global energy demand to continue to increase in both member and ~~have approached $60 per barrel, improving our customers’ economics~~non-member countries of ~~drilling~~the Organization for Economic Co-operation and Development. Forecasts indicate that non-member countries will experience the largest population growth and require the most significant improvement in living standards, compounding the effect on energy demand for the foreseeable future. We believe that this increase in global energy demand will result in meaningful incremental demand for oil and ~~gas wells. This is,~~gas. In the context of the pronounced decline in ~~large part, due~~investment in exploration and production activities over the last decade, we anticipate that a prolonged period of elevated hydrocarbon prices and investment in drilling activity will be necessary to ~~favorable trends in the hydrodcarbon supply‑demand balance: oil supply has declined relative to~~meet this demand.

~~Improved oil prices have resulted in increased opportunities for our drilling services. In markets requiring~~With deepwater and harsh environment ~~floating~~fields generating robust economic returns versus other hydrocarbon sources, combined with their comparably low carbon intensity of production, we expect a significant portion of the required spending in fossil fuel development will be allocated to deepwater and harsh environment projects. As there are now fewer high-specification offshore drilling rigs ~~such as the Norwegian North Sea, the limited supply~~capable of ~~these specialized rigs has improved fleet utilization, which is resulting in increased dayrates on rigs being tendered for new work~~operating in these ~~regions. Outside of harsh environment~~ markets, ~~and notwithstanding an~~we believe that this increase in ~~tendering activity, the excess supply~~demand will support further improvement of ultra‑deepwater floaters relative to demand continues to apply downward pressure on dayrates. However, as the hydrocarbon supply‑demand balance improves, we expect additional upward pressure on oil prices, ultimately resulting in greater demand for ultra‑deepwater drillingdayrates and increased reactivations of cold stacked rigs and ~~improved dayrates for our~~delivery of stranded newbuild assets.

As of October 26, 2017, our contract backlog was $9.4 billion compared to $10.2 billion as of July 25, 2017. The risks of drilling project delays, contract renegotiations and contract terminations and cancellations remain in the near term.

Fleet status—We refer to the availability of our rigs in terms of the uncommitted fleet rate. The uncommitted fleet rate is defined as the number of uncommitted days divided by the total number of rig calendar days in the measurement period, expressed as a percentage. An uncommitted day is defined as a calendar day during which a rig is idle or stacked, is not contracted to a customer and is not committed to a shipyard. The uncommitted fleet rates exclude the effect of priced options. As of ~~October 26, 2017,~~April 18, 2023, the uncommitted fleet rates for the remainder of ~~2017~~2023 and each of the four years in the period ending December 31, ~~2021~~2027 were as follows:

2017

2018

2019

2020

2021

Uncommitted fleet rate

Ultra-deepwater floaters

60
%

65
%

69
%

78
%

79
%

Harsh environment floaters

19
%

48
%��

93
%

100
%

100
%

Deepwater floaters

—
%

17
%

100
%

100
%

100
%

Midwater floaters

50
%

63
%

90
%

100
%

100
%

~~- 21 -~~

2023

2024

2025

2026

2027

Uncommitted fleet rate

Ultra-deepwater floaters

46
%

57
%

68
%

77
%

85
%

Harsh environment floaters

48
%

49
%

82
%

92
%

96
%

~~Table of Contents~~

Performance and Other Key Indicators

Contract backlog—We believe our industry leading contract backlog sets us apart from the competition and provides indicators of our future revenue-earning opportunities. Contract backlog is defined as the maximum contractual operating dayrate multiplied by the number of days remaining in the firm contract period, excluding revenues for mobilization, demobilization, ~~and~~ contract preparation, or other incentive provisions or reimbursement revenues, which are not expected to be significant to our contract drilling revenues.

The contract backlog represents the maximum contract drilling revenues that can be earned considering the contractual operating dayrate in effect during the firm contract period and represents the basis for the maximum revenues in our revenue efficiency measurement. To determine maximum revenues for purposes of calculating revenue efficiency, however, we include the revenues earned for mobilization, demobilization and contract preparation, other incentive provisions or cost escalation provisions which are excluded from the amounts presented for contract backlog.period. The contract backlog for our fleet was as follows:

October 26,

July 25,

February 9,


2017

2017

2017

Contract backlog

(In millions)

Ultra-deepwater floaters

$
8,664

$
9,234

$
10,070

Harsh environment floaters

450

540

623

Deepwater floaters

155

190

259

Midwater floaters

83

100

127

High-specification jackups

71

96

172

Total contract backlog

$
9,423

$
10,160

$
11,251


	April 18,		February 9,		April 25,
	2023		2023		2022

	(in millions)
Contract backlog
Ultra-deepwater floaters	$	7,084	$	7,378	$	5,080
Harsh environment floaters		1,505		1,159		1,041
Total contract backlog	$	8,589	$	8,537	$	6,121

Our contract backlog includes only firm commitments, including amounts associated with our contracted newbuild units under construction, which are represented by signed drilling contracts or, in some cases, by other definitive agreements awaiting contract execution. ~~Our contract backlog includes amounts associated with our newbuild units that are currently under construction.~~ It does not include conditional agreements and options to extend firm commitments.

The contractual operating dayrate may be higher than the actual dayrate ~~that~~ we ultimately receive orbecause an alternative contractual dayrate, such as a ~~waiting‑on‑weather~~waiting-on-weather rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances. The contractual operating dayrate may also be higher than the actual dayrate ~~that~~ we ultimately receive because of a number of factors, including rig downtime or suspension of operations. In certain contracts, the actual dayrate may be reduced to zero if, for example, repairs extend beyond a stated period of time.

~~In September 2017, one~~- 16 -

Table of ~~our customers notified us of its election to early terminate the drilling contract for the ultra‑deepwater drillship~~ ~~Discoverer Clear Leader~~, effective November 2017, prior to its expiration in October 2018. Our contract backlog for ultra‑deepwater floaters presented as of October 26, 2017, reflects a reduction of approximately $206 million of backlog related to the early termination of this contract. During the year ended December 31, 2016, our customers early terminated or cancelled drilling contracts for ~~Deepwater Asgard~~, ~~Deepwater Champion~~, ~~Deepwater Millennium, Discoverer Deep Seas, Discoverer India, GSF Constellation II, GSF Development Driller I~~ ~~and~~ ~~Transocean John Shaw~~.Contents

On May 31, 2017, we completed the sale of 10 high‑specification jackups and novated the contracts relating to the construction of five high‑specification jackups, together with related assets. At October 26, 2017, the contract backlog for the high‑specification jackups represents the contract backlog associated with the two high‑specification jackups that we continue to operate following the sale. See “—Operating Results” and “—Liquidity and Capital Resources—Drilling Fleet.”

Average daily revenue—We believe average daily revenue provides a comparative measurement unit for our revenue-earning performance. Average daily revenue is defined as operating revenues, excluding revenues for contract ~~drilling revenues~~terminations, reimbursements and contract intangible amortization, earned per operating day. An operating day is defined as a ~~calendar~~ day ~~during~~for which a rig is contracted to earn a dayrate during the firm contract period after ~~commencement of operations.~~operations commence. The average daily revenue for our fleet was as follows:

Three months ended

September 30,

June 30,

September 30,


2017

2017

2016

Average daily revenue

Ultra-deepwater floaters

$
449,300

$
482,200

$
487,800

Harsh environment floaters

$
213,100

$
262,200

$
225,900

Deepwater floaters

$
187,300

$
199,000

$
234,100

Midwater floaters

$
98,900

$
100,300

$
240,400

High-specification jackups

$
151,200

$
142,800

$
143,100

Total fleet average daily revenue

$
319,000

$
329,900

$
332,100


	Three months ended
	March 31,		December 31,		March 31,
	2023		2022		2022
Average daily revenue
Ultra-deepwater floaters	$	360,000	$	344,800	$	305,600
Harsh environment floaters	$	376,000	$	357,900	$	399,100
Total fleet average daily revenue	$	364,100	$	348,600	$	334,500

Our average daily revenue fluctuates relative to market conditions and our revenue efficiency. The average daily revenue may ~~also~~ be affected by ~~revenues for lump sum~~incentive performance bonuses or penalties or demobilization fees received from our customers. Our total fleet average daily revenue is also affected by the mix of rig classes being operated, as deepwater floaters, midwater floaters and high‑specification jackupsfee revenues. Revenues for a contracted newbuild unit are ~~typically contracted at lower dayrates compared to ultra‑deepwater floaters and harsh environment floaters. We include newbuilds~~included in the calculation when the ~~rigs commence~~rig commences operations upon acceptance by the customer. We remove rigs from the calculation upon disposal or classification as held for sale, ~~except when~~unless we continue to operate rigs subsequent to sale, asin which case we ~~do with two~~remove the rigs at the time of completion or novation of the ~~high‑specification jackups sold in May 2017.~~contract.

~~- 22 -~~

~~Table of Contents~~

Revenue efficiency—We believe revenue efficiency measures our ability to ultimately convert our contract backlog into revenues. Revenue efficiency is defined as actual operating revenues, excluding revenues for contract ~~drilling revenues~~terminations and reimbursements, for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage. Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding ~~amounts related to~~revenues for incentive ~~provisions.~~provisions, reimbursements and contract terminations. The revenue efficiency rates for our fleet were as follows:

Three months ended

September 30,

June 30,

September 30,

2017

2017

2016

Revenue efficiency


Ultra-deepwater floaters

99
%

97
%

100
%

Harsh environment floaters

92
%

98
%

97
%

Deepwater floaters

90
%

96
%

96
%

Midwater floaters

97
%

99
%

103
%

High-specification jackups

99
%

99
%

114
%

Total fleet average revenue efficiency

97
%

97
%

100
%


	Three months ended
	March 31,		December 31,		March 31,
	2023		2022		2022
Revenue efficiency
Ultra-deepwater floaters	97.4	%	97.8	%	94.9	%
Harsh environment floaters	98.7	%	98.4	%	95.0	%
Total fleet average revenue efficiency	97.8	%	98.0	%	94.9	%

Our revenue efficiency rate varies due to revenues earned under alternative contractual dayrates, such as a ~~waiting‑on‑weather~~waiting-on-weather rate, repair rate, standby rate, force majeure rate or zero rate, that may apply under certain circumstances. Our revenue efficiency rate is also affected by incentive performance bonuses or penalties. We include newbuilds in the calculation when the rigs commence operations upon acceptance by the customer. We exclude rigs that are not operating under contract, such as those that are stacked.

~~In the three months ended September 30, 2016, revenue efficiency~~Rig utilization—We present our rig utilization as an indicator of our ability to secure work for our midwater floaters and high‑specification jackups exceeded maximum revenues primarily as a result of achieving higher performance, earning certain contractual incentive bonuses and collecting previously deferred revenues.

~~Rig utilization~~—fleet. Rig utilization is defined as the total number of operating days divided by the total number of rig calendar days in the measurement period, expressed as a percentage. The rig utilization rates for our fleet were as follows:

Three months ended

September 30,

June 30,

September 30,

2017

2017

2016

Rig utilization






Ultra-deepwater floaters

42
%

38
%

45
%

Harsh environment floaters

77
%

62
%

71
%

Deepwater floaters

69
%

67
%

50
%

Midwater floaters

50
%

33
%

42
%

High-specification jackups

95
%

54
%

50
%

Total fleet average rig utilization

52
%

44
%

49
%


	Three months ended
	March 31,		December 31,		March 31,
	2023		2022		2022
Rig utilization
Ultra-deepwater floaters	52.5	%	47.9	%	49.8	%
Harsh environment floaters	50.1	%	53.5	%	60.3	%
Total fleet average rig utilization	51.9	%	49.4	%	52.7	%

Our rig utilization rate declines as a result of idle and stacked rigs and during shipyard and mobilization periods to the extent these rigs are not earning revenues. We include newbuilds in the calculation when the rigs commence operations upon acceptance by the customer. We remove rigs from the calculation upon disposal or classification as held for ~~sale or classification as discontinued operations.~~sale. Accordingly, our rig utilization can increase when we remove idle or stacked units ~~are removed~~ from our ~~drilling~~ fleet.

~~- 23 -~~

- 17 -

Operating Results

Three months ended ~~September 30, 2017~~March 31, 2023 compared to the three months ended ~~September 30, 2016~~March 31, 2022

The following is an analysis of our operating results. See “—Performance and Other Key ~~Indicators”~~Indicators” for definitions of operating days, average daily revenue, revenue efficiency and rig utilization.


	Three months ended March 31,
	2023			2022			Change		% Change

	(In millions, except day amounts and percentages)
Operating days		1,750			1,753			(3)	nm
Average daily revenue	$	364,100		$	334,500		$	29,600	9	%
Revenue efficiency		97.8	%		94.9	%
Rig utilization		51.9	%		52.7	%

Contract drilling revenues	$	649		$	586		$	63	11	%

Operating and maintenance expense		(409)			(412)			3	1	%
Depreciation and amortization expense		(182)			(183)			1	1	%
General and administrative expense		(45)			(42)			(3)	(7)	%
Gain (loss) on disposal of assets, net		(170)			1			(171)	nm
Operating loss		(157)			(50)			(107)	nm

Other income (expense), net
Interest income		19			2			17	nm
Interest expense, net of amounts capitalized		(249)			(102)			(147)	nm
Loss on retirement of debt		(32)			—			(32)	nm
Other, net		5			1			4	nm
Loss before income tax expense		(414)			(149)			(265)	nm
Income tax expense		(51)			(26)			(25)	(96)	%
Net loss	$	(465)		$	(175)		$	(290)	nm

Three months ended

September 30,

2017

2016

Change

% Change

(In millions, except day amounts and percentages)









Operating days

2,189

2,657

(468)

(18)
%

Average daily revenue

$
319,000

$
332,100

$
(13,100)

(4)
%

Revenue efficiency

97
%

100
%

Rig utilization

52
%

49
%

Contract drilling revenues

$
699

$
886

$
(187)

(21)
%

Other revenues

109

20

89

nm

808

906

(98)

(11)
%

Operating and maintenance expense

(323)

(409)

86

21
%

Depreciation expense

(197)

(225)

28

12
%

General and administrative expense

(39)

(41)

2

5
%

Loss on impairment

(1,385)

(11)

(1,374)

nm

Gain (loss) on disposal of assets, net

(9)

9

(18)

nm

Operating income (loss)

(1,145)

229

(1,374)

nm

Other income (expense), net

Interest income

21

5

16

nm

Interest expense, net of amounts capitalized

(112)

(109)

(3)

(3)
%

Gain (loss) on retirement of debt

(1)

110

(111)

nm

Other, net

6

7

(1)

(14)
%

Income (loss) before income tax expense

(1,231)

242

(1,473)

nm

Income tax expense

(180)

(6)

(174)

nm

Net income (loss)

$
(1,411)

$
236

$
(1,647)

nm

“nm” means not meaningful.

~~Operating~~Contract drilling revenues—Contract drilling revenues ~~decreased~~increased for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the three months ended ~~September 30, 2016,~~March 31, 2022, primarily due to the following: (a) approximately ~~$100~~$40 million resulting from ~~lower~~higher dayrates, (b) approximately ~~$95~~$35 million resulting from ~~rigs sold or classified as held for sale,~~the entry into service of the newbuild ultra-deepwater floater Deepwater Atlas and (c) ~~approximately $25 million resulting from lower revenue efficiency and (d)~~ approximately $20 million resulting from ~~lower activity across~~higher revenue efficiency for the fleet. These ~~decreases~~increases were partially offset by approximately ~~$55~~$30 million ~~of increased revenues associated with our newbuild ultra‑deepwater drillships that commenced operations during the year ended December 31, 2016.~~

~~Other revenues increased~~resulting from lower activity for the ~~three months ended September 30, 2017, compared to the three months ended September 30, 2016,~~active fleet, primarily ~~due to the recognition of $87 million of revenues awarded to us in connection with a drilling contract terminated by a customer in the year ended December 31, 2015.~~for our harsh environment floaters.

Costs and expenses—Operating and maintenance costs and expenses decreased for the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the three months ended ~~September 30, 2016,~~March 31, 2022, primarily due to the following: (a) approximately ~~$60~~$25 million resulting from ~~rigs sold or classified as held for sale,~~rig operating activities and (b) ~~approximately $40 million resulting from decreased offshore costs and (c)~~ approximately $10 million resulting from ~~reduced onshore~~the effect of currency exchange rates on personnel-related costs. These decreases were partially offset by ~~increased costs and expenses as follows:~~the following (a) approximately $15 million resulting from ~~our~~the effect of inflation on personnel-related costs, (b) approximately $10 million resulting from the newbuild ~~ultra‑deepwater drillships that commenced operations~~ultra-deepwater floaters placed into service in the year ended December 31, ~~2016~~2022, and ~~(b)~~(c) approximately $10 million ~~resulting from rig reactivations.~~related to in-service maintenance costs.

Depreciation expense decreased for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, primarily resulting from rigs sold or classified as held for sale.

Loss on ~~impairment~~disposal of assets—In the three months ended ~~September 30, 2017 and 2016,~~March 31, 2023, we recognized a loss of ~~$1.4 billion and $11~~$169 million ~~respectively,~~ associated with our non-cash contribution of the ~~impairment of certain~~ultra-deepwater drillship Ocean Rig Olympia and related assets ~~to be sold~~ for ~~scrap value or for alternative use, which were classified as held for sale at the time of impairment.~~a noncontrolling ownership interest in GSR.

~~- 24 -~~

~~Table of Contents~~

Other income and expense—Interest expense, net of amounts capitalized, increased in the three months ended ~~September 30, 2017,~~March 31, 2023, compared to the three months ended ~~September 30, 2016,~~March 31, 2022, primarily due to the following: (a) approximately ~~$35~~$133 million increased interest resulting from the fair value adjustment of the bifurcated compound exchange feature embedded in the indenture governing the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”) and (b) approximately $44 million increased interest resulting from debt issued since June 2022, partially offset by (c) approximately $24 million decreased interest resulting from debt repaid as scheduled or early retired and (d) approximately $5 million of increased interest ~~expense resulting from debt issued subsequent to September 30, 2016 and (b) approximately $12 million of increased interest expense resulting from reduced interest costs~~ capitalized for our newbuild ultra‑deepwater drillships that commenced operations during the year ended December 31, 2016. Partially offsetting these increases was approximately $45 million of decreased interest expense resulting from the retirement of debt.projects.

Loss on retirement of debt in the three months ended September 30, 2017, resulted primarily from the retirement of notes validly tendered after the early tender date of the 2017 Tender Offers. Gain on retirement of debt in the three months ended September 30, 2016, resulted primarily from the retirement of notes validly tendered in cash tender offers (the “2016 Tender Offers”).

~~Income tax expense—We operate internationally and provide for income taxes based on the tax laws and rates in the countries in which we operate and earn income.~~ In the three months ended ~~September 30, 2017 and 2016,~~March 31, 2023, we recognized an aggregate net loss of $32 million associated with the early retirement of $1.38 billion aggregate principal amount of our ~~effective tax rate, excluding discrete items, was 56.5 percent and 26.6 percent, respectively, based on income from continuing operations before income~~debt securities.

Income tax expense after excluding certain items, such as losses on impairment and gains and losses on certain asset disposals. Our effective tax rate increased in the three months ended September 30, 2017, compared to the three months ended September 30, 2016, primarily due to (a) changes in the relative blend of income from operations in certain jurisdictions and (b) valuation allowances on deferred tax assets for losses not expected to be realized. We consider the tax effect, if any, of the excluded items as well as settlements of prior year tax estimates to be discrete period tax expenses or ~~benefits.~~ benefit—In the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, our effective tax rate was (12.3) percent and (17.6) percent, respectively, based on loss before income tax expense. In the three months ended March 31, 2023 and 2022, the effect of ~~the~~ various discrete period tax items was a net tax ~~expense~~benefit of ~~$90~~$11 million and ~~a net~~$8 million, respectively, and the increase of such tax benefit was primarily due to releases of ~~$32 million, respectively.~~uncertain tax positions in the current-year period. In the three months ended ~~September 30, 2017,~~March 31, 2023, such discrete items ~~were primarily related to tax benefit~~included expiration of ~~changes in unrecognized tax benefit associated with~~various uncertain tax positions ~~taken in prior years~~ and changes to valuation ~~allowances on deferred tax assets not expected to be realized.~~allowances. In the three months ended ~~September 30, 2016,~~March 31,

- 18 -

Table of Contents

2022, such discrete items ~~were primarily related to~~included expiration of various uncertain tax ~~benefit of changes in unrecognized tax benefit associated with tax positions taken in prior years and valuation allowances on deferred tax assets for losses not expected to be realized. For~~positions. In the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, these discrete tax items, coupled with the excluded income and expense items noted above, resulted in an~~2022, our effective tax rate, ~~of (14.7)~~excluding discrete items, was (29.0) percent and ~~2.5~~(22.8) percent, respectively, based on ~~income from continuing operations~~loss before income tax expense. ~~Our effective tax rate, after including discrete tax items noted above, excluding the income~~

Due to our operating activities and expense items noted above, decreased mainly due to loss on impairment and disposal of assets with no tax benefit and valuation allowances recorded on U.S. deferred tax assets not expected to be realized.

In evaluating our ability to realize deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses in recent years. As of September 30, 2017, our consolidated cumulative loss incurred over the recent three‑year period, primarily due to losses on impairment and disposal of assets, represented significant objective negative evidence for our evaluation. Such evidence, together with potential organizational changes that could alter our ability to realize certain deferred tax assets, has limited our ability to consider other subjective evidence, such as projected future contract activity. As a result, we recorded a valuation allowance of $144 million to recognize only a portion of our U.S. deferred tax assets that are more likely than not to be recognized. If estimated future taxable income changes during the carryforward periods or if the cumulative loss is no longer present, we may adjust the amount of deferred tax assets that we expect to realize.

The relationship between our provision for or benefit from income taxes and our income before income taxes can vary significantly from period to period considering, among other factors, (a) the overall level of income before income taxes, (b) changes in the blend of income that is taxed based on gross revenues versus income before taxes, (c) rig movements between taxing jurisdictions and (d) our rig operating structures. Generally, our marginal tax rate is lower than our effective tax rate. Consequently,structure, our income tax expense does not change proportionally with our income before income taxes. Significant decreases in our income before income taxes typically lead to higher effective tax rates, while significant increases in income before income taxes can lead to lower effective tax rates, subject to the other factors impacting income tax expense noted above. With respect to the effective tax rate calculation for the three months ended ~~September 30, 2017,~~March 31, 2023, a significant portion of our income tax expense was generated in countries in which income taxes are imposed or treated to be imposed on gross revenues with the most significant of these countries being Angola and India. Conversely, the countries in which we incurred the most significant income taxes during this period that were based on income before income tax include ~~Brazil, Switzerland, Norway, the U.K. and~~ the U.S.

, Hungary, Brazil, Colombia, Norway and Switzerland. Our rig operating structures further complicate our tax calculations, especially in instances where we have more than one operating structure for the ~~particular~~ taxing jurisdiction and, thus, more than one method of calculating taxes depending on the operating structure utilized by the rig under the contract. For example, two rigs operating in the same country could generate significantly different provisions for income taxes if they are owned by two different subsidiaries that are subject to differing tax laws and regulations in the respective country of incorporation.

~~- 25 -~~

~~Table of Contents~~

~~Nine months ended September 30, 2017 compared to the nine months ended September 30, 2016~~

The following is an analysis of our operating results. See “—Performance and Other Key Indicators” for definitions of operating days, average daily revenue, revenue efficiency and rig utilization.

Nine months ended

September 30,

2017

2016

Change

% Change

(In millions, except day amounts and percentages)









Operating days

6,513

8,042

(1,529)

(19)
%

Average daily revenue

$
328,800

$
360,700

$
(31,900)

(9)
%

Revenue efficiency

97
%

98
%

Rig utilization

46
%

49
%

Contract drilling revenues

$
2,142

$
2,912

$
(770)

(26)
%

Other revenues

202

275

(73)

(27)
%

2,344

3,187

(843)

(26)
%

Operating and maintenance expense

(999)

(1,561)

562

36
%

Depreciation expense

(648)

(667)

19

3
%

General and administrative expense

(113)

(125)

12

10
%

Loss on impairment

(1,498)

(26)

(1,472)

nm

(Gain) loss on disposal of assets, net

(1,602)

8

(1,610)

nm

Operating income (loss)

(2,516)

816

(3,332)

nm

Other income (expense), net

Interest income

34

15

19

nm

Interest expense, net of amounts capitalized

(368)

(296)

(72)

(24)
%

Gain (loss) on retirement of debt

(49)

148

(197)

nm

Other, net

7

9

(2)

(22)
%

Income (loss) before income tax expense

(2,892)

692

(3,584)

nm

Income tax expense

(103)

(122)

19

16
%

Net income (loss)

$
(2,995)

$
570

$
(3,565)

nm

~~“nm” means not meaningful.~~

~~Operating revenues~~—Contract drilling revenues decreased for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to the following: (a) approximately $440 million resulting from additional rigs idle or stacked, (b) approximately $395 million resulting from rigs sold or classified as held for sale and (c) approximately $195 million resulting from lower dayrates. These decreases were partially offset by increased revenues as follows: (a) approximately $235 million resulting from our three newbuild ultra‑deepwater drillships that commenced operations during the year ended December 31, 2016, and (b) approximately $40 million resulting from rigs reactivated since January 1, 2016.

Other revenues decreased for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, due to the recognition of $138 million resulting from drilling contracts early terminated or cancelled by our customers and approximately $21 million resulting from reimbursable items. These decreases were partially offset by the recognition of $87 million of revenues awarded to us in connection with a drilling contract terminated by a customer in the year ended December 31, 2015.

~~Costs and expenses~~—Operating and maintenance costs and expenses decreased for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to the following: (a) approximately $230 million resulting from rigs sold or classified as held for sale, (b) approximately $225 million resulting from a greater number of rigs idle or stacked, (c) approximately $85 million resulting from reduced onshore costs and (d) approximately $80 million resulting from reduced offshore costs. These decreases were partially offset by approximately $55 million of increased costs resulting from our three newbuild ultra‑deepwater drillships that commenced operations in the year ended December 31, 2016.

Depreciation expense decreased for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to the following: (a) approximately $39 million of decreased depreciation resulting from rigs sold or classified as held for sale and (b) approximately $15 million of decreased depreciation primarily resulting from the impairment of our midwater floater asset group and the retirement of other assets subsequent to September 30, 2016. These decreases were partially offset by approximately $35 million of increased depreciation associated with our newbuild ultra‑deepwater drillships placed into service in the year ended December 31, 2016.

~~- 26 -~~

~~Table of Contents~~

General and administrative expense decreased for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to the following: (a) approximately $5 million of reduced professional fees and (b) approximately $3 million of reduced personnel costs.

~~Loss on impairment or disposal of assets~~—In the nine months ended September 30, 2017, we recognized a loss on impairment related to the following: (a) a loss of $1.4 billion associated with the impairment of certain assets to be sold for scrap value or for alternative use, which were classified as held for sale at the time of impairment and (b) a loss of $94 million associated with the impairment of our midwater floater asset group. In the nine months ended September 30, 2016, we recognized a loss of $26 million associated with the impairment of certain assets classified as held for sale.

Loss on disposal of assets in the nine months ended September 30, 2017, was primarily the result of the completion of the sale of 10 high‑specification jackups and novation of the contracts relating to the construction of five high‑specification jackups, together with related assets.

~~Other income and expense~~—Interest expense, net of amounts capitalized, increased in the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, primarily due to the following: (a) approximately $142 million of increased interest expense resulting from debt issued subsequent to September 30, 2016, (b) approximately $50 million of increased interest expense resulting from reduced interest costs capitalized for our newbuild ultra‑deepwater drillships that commenced operations during the year ended December 31, 2016 and (c) approximately $12 million of increased interest expense resulting from downgrades to the credit ratings for our senior unsecured long‑term debt. Partially offsetting these increases was approximately $120 million of decreased interest expense resulting from the retirement of debt.

Loss on retirement of debt in the nine months ended September 30, 2017, resulted primarily from the retirement of notes validly tendered in the 2017 Tender Offers. Gain on retirement of debt in the nine months ended September 30, 2016, resulted primarily from the following: (a) an aggregate net gain of $104 million associated with the retirement of notes validly tendered in the 2016 Tender Offers and (b) an aggregate gain of $44 million resulting from the retirement of notes repurchased in the open market.

~~Income tax expense~~—We operate internationally and provide for income taxes based on the tax laws and rates in the countries in which we operate and earn income. In the nine months ended September 30, 2017 and 2016, our effective tax rate, excluding discrete items, was 64.2 percent and 25.9 percent, respectively, based on income from continuing operations before income tax expense, after excluding certain items, such as losses on impairment and gains and losses on certain asset disposals. Our effective tax rate increased in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily due to (a) changes in the relative blend of income from operations in certain jurisdictions and (b) valuation allowances on deferred tax assets for losses not expected to be realized. We consider the tax effect, if any, of the excluded items as well as settlements of prior year tax estimates to be discrete period tax expenses or benefits. In the nine months ended September 30, 2017 and 2016, the effect of the various discrete period tax items was a net tax benefit of $57 million and $24 million, respectively. In the nine months ended September 30, 2017, such discrete items were primarily related to tax benefit of changes in unrecognized tax benefit associated with tax positions taken in prior years, valuation allowances on deferred tax assets for foreign tax credits not expected to be realized, release of a valuation allowance on deferred tax assets for losses expected to be realized and deductions related to resolution of certain litigation matters related to Macondo well incident. In the nine months ended September 30, 2016, such discrete items were primarily related to tax benefit of changes in unrecognized tax benefit associated with tax positions taken in prior years and valuation allowances on deferred tax assets for losses not expected to be realized. For the nine months ended September 30, 2017 and 2016, these discrete tax items, coupled with the excluded income and expense items noted above, resulted in an effective tax rate of (3.6) percent and 17.8 percent, respectively, based on income from continuing operations before income tax expense. Our effective tax rate, after including the discrete tax items noted above, and excluding the income and expense items noted above, decreased mainly due to loss on impairment and disposal of assets with no tax benefit and valuation allowances recorded on U.S. deferred tax assets not expected to be realized.

For the nine months ended September 30, 2017 and 2016, in accordance with accounting standards for the provision of income taxes, we calculated our annual estimated effective income tax rate of 64.2 percent and 25.9 percent, respectively, by excluding certain operating losses in taxable jurisdictions for which we do not expect to realize a tax benefit. For the nine months ended September 30, 2017 and 2016, if we had included all jurisdictions without regard to our expectations for such realization, our estimated effective income tax rate would have been 89.3 percent and 22.7 percent, respectively.

~~- 27 -~~

~~Table of Contents~~

(d) our rig operating structures. Generally, our marginal tax rate is lower than our effective tax rate. Consequently, our income tax expense does not change proportionally with our income before income taxes. Significant decreases in our income before income taxes typically lead to higher effective tax rates, while significant increases in income before income taxes can lead to lower effective tax rates, subject to the other factors impacting income tax expense noted above. With respect to the effective tax rate calculation for the nine months ended September 30, 2017, a significant portion of our income tax expense was generated in countries in which income taxes are imposed on gross revenues, with the most significant of these countries being Angola. Conversely, the countries in which we incurred the most significant income taxes during this period that were based on income before income tax include Brazil, Switzerland, Norway, the U.K. and the U.S.

Our rig operating structures further complicate our tax calculations, especially in instances where we have more than one operating structure for the particular taxing jurisdiction and, thus, more than one method of calculating taxes depending on the operating structure utilized by the rig under the contract. For example, two rigs operating in the same country could generate significantly different provisions for income taxes if they are owned by two different subsidiaries that are subject to differing tax laws and regulations in the respective country of incorporation

Liquidity and Capital Resources

Sources and uses of cash

At ~~September 30, 2017,~~March 31, 2023, we had ~~$2.7 billion~~$747 million in unrestricted cash and cash equivalents and $208 million in restricted cash and cash equivalents. In the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, our primary sources of cash were ~~our~~net cash ~~flows from operating activities, including cash proceeds from customers for early terminations or cancellations of drilling contracts, net~~ proceeds from the issuance of ~~debt and net proceeds from the sale of the high‑specification jackups.~~debt. Our primary uses of cash were ~~the repayment of~~ debt ~~primarily related to the 2017 Tender Offers and repurchases of debt in the open market, and~~repayments, capital expenditures ~~primarily associated with our newbuild construction projects.~~and net cash used in operations.

Nine months ended

September 30,


2017

2016

Change

(In millions)

Cash flows from operating activities

Net income

$
(2,995)

$
570

$
(3,565)

Depreciation

648

667

(19)

Loss on impairment

1,498

26

1,472

Loss on disposal of assets, net

1,602

(8)

1,610

(Gain) loss on retirement of debt

49

(148)

197

Deferred income tax expense

32

44

(12)

Other non-cash items, net

59

42

17

Changes in deferred revenues and costs, net

(67)

34

(101)

Changes in other operating assets and liabilities, net

61

51

10

$
887

$
1,278

$
(391)


	Three months ended
	March 31,
	2023		2022		Change

	(In millions)
Cash flows from operating activities
Net loss	$	(465)	$	(175)	$	(290)
Non-cash items, net		607		262		345
Changes in operating assets and liabilities, net		(189)		(88)		(101)
	$	(47)	$	(1)	$	(46)

Net cash ~~provided by~~used in operating activities ~~decreased~~increased primarily due to ~~a decrease~~increased cash paid to suppliers, including costs incurred and paid on behalf of ~~$90 million cash received~~and reimbursable from ~~customers for early terminations or cancellations of drilling contracts and reduced operating activities.~~unconsolidated affiliates.


							Three months ended
							March 31,
							2023		2022		Change

	Nine months ended
	September 30,
	2017		2016		Change
	(In millions)
							(In millions)
Cash flows from investing activities
Capital expenditures	$	(386)	$	(1,072)	$	686	$	(81)	$	(106)	$	25
Investments in equity of unconsolidated affiliates								(10)		(15)		5
Proceeds from disposal of assets, net		330		16		314		1		1		—
Other, net		10		—		10
	$	(46)	$	(1,056)	$	1,010
							$	(90)	$	(120)	$	30

Net cash used in investing activities ~~decreased~~increased primarily due to ~~reduced~~increased capital expenditures ~~primarily associated with our major construction projects, partially offset by increased proceeds from asset disposals, primarily~~ related to ~~the sale of 10 high‑specification jackups and the novation of contracts relating to the~~our newbuild construction ~~of five high‑specification jackups, together with related assets, in the current‑year period with no comparable activity in the prior‑year period.~~program.

~~- 28 -~~

~~Table of Contents~~


							Three months ended
							March 31,
							2023		2022		Change

	Nine months ended
	September 30,
	2017		2016		Change
	(In millions)
							(in millions)
Cash flows from financing activities
Proceeds from debt issuance, net of issue costs	$	403	$	1,210	$	(807)
Repayments of debt		(1,629)		(1,316)		(313)	$	(1,564)	$	(165)	$	(1,399)
Proceeds from cash accounts and investments restricted for financing activities, net of deposits		53		100		(47)
Distributions to holders of noncontrolling interest		—		(23)		23
Proceeds from issuance of debt, net of issue costs								1,665		—		1,665
Proceeds from issuance of shares, net of issue costs								—		103		(103)
Other, net		(3)		2		(5)		—		(3)		3
	$	(1,176)	$	(27)	$	(1,149)
							$	101	$	(65)	$	166

Net cash ~~used in~~provided by financing activities increased primarily due to (a) ~~reduced~~net cash proceeds from the issuance of ~~the 5.52%~~$525 million aggregate principal amount of 8.375% Senior Secured Notes ~~in the current‑year period compared to the cash proceeds from the issuance~~and $1.175 billion aggregate principal amount of ~~the 9.00%~~8.75% Senior Secured Notes, ~~due July 2023 in the prior‑year period, and~~partially offset by (b) ~~increased cash used to repay~~repayments of $1.38 billion aggregate principal amount of certain of our debt ~~primarily related to our cash tender offers in each period.~~securities.

Sources and uses of liquidity

Overview—We expect to use existing unrestricted cash balances, internally generated cash flows, borrowings under our ~~existing bank credit agreement,~~Secured Credit Facility or proceeds from the disposal of assets or ~~proceeds from~~ the issuance of ~~additional~~ debt or shares to fulfill anticipated near-term obligations, which may include ~~business combinations,~~ capital expenditures, working capital and other operational requirements, scheduled debt maturities or other payments. We may ~~also~~

- 19 -

Table of Contents

consider establishing additional financing arrangements with banks or other capital ~~providers. Subject~~providers, and subject to market conditions and other factors, we may ~~also~~ be required to provide collateral for any such future financing arrangements.

We have generated positive cash flows from operating activities over recent years and, although we cannot provide assurances, we currently expect that such cash flows will continue to be positive over the next year. Among other factors, if general economic, financial, industry or business conditions deteriorate, if we experience poor operating results, or if we incur costs to, for example, reactivate, stack or otherwise assure the marketability of our fleet, our cash flows from operations may be reduced or negative.

We continue to evaluate additional potential liability management transactions in connection with our ongoing efforts to prudently manage our capital structure and improve our liquidity. In each case subject to then existing market conditions and to our ~~then~~ expected liquidity needs, among other factors, we may continue to use ~~a portion of our~~existing unrestricted cash balances, internally generated cash flows and proceeds from asset sales to ~~reduce~~pursue liability management transactions, including among others, purchasing or exchanging one or more existing series of our debt ~~prior to scheduled maturities through debt repurchases, either~~securities in the open market, or in privately negotiated transactions, through tender offers or through ~~debt redemptions~~exchange offers. Any future purchases, exchanges or ~~tender offers.~~other transactions may be on the same terms or on terms that are more or less favorable to holders than the terms of any prior transaction. We can provide no assurance as to which, if any, of these alternatives, or combinations thereof, we may choose to pursue in the future, if at all, or as to the timing with respect to any future transactions.

Our ability and willingness to access tothe debt and equity markets ~~may be limited due to~~is a function of a variety of ~~events,~~factors, including, among others, ~~credit rating agency downgrades of our debt ratings, industry conditions,~~ general economic, ~~conditions,~~industry or market conditions, ~~and~~ market perceptions of us and our ~~industry. In January~~industry and ~~October 2017 and during the year ended December 31, 2016, three~~ credit rating ~~agencies downgraded~~agencies’ views of our ~~non‑credit enhanced senior unsecured long‑term~~debt. General economic or market conditions could have an adverse effect on our business and financial position and on the business and financial position of our customers suppliers and lenders and could affect our ability to access the capital markets on acceptable terms or at all and our future need or ability to borrow under our Secured Credit Facility. In addition to our potential sources of funding, the effects of such global events could impact our liquidity or need to alter our allocation or sources of capital, implement further cost reduction measures and change our financial strategy. Additionally, the rating of the majority of our long-term debt, ~~(“Debt Rating”). Such downgrades have caused and will cause~~which is below investment grade, is causing us to experience increased fees ~~under our credit facility~~ and interest rates under our Secured Credit Facility and agreements governing certain of our senior notes. ~~Further~~Future downgrades may ~~affect or limit~~further restrict our ability to access the debt ~~markets in~~market for sources of capital and may negatively impact the ~~future. Our ability to access~~cost of such ~~markets may be severely restricted~~capital at a time when we would like, or need, to access such markets, which could have an impact on our flexibility to react to changing economic and business conditions. ~~An economic downturn could have an impact on the lenders participating in our credit facilities or on our customers, causing them to fail to meet their obligations to us.~~

Our internally generated cash flow is directly related to our business and the market sectors in which we operate. Should the drilling market deteriorate, or should we experience poor results in our operations, cash flow from operations may be reduced. Secured Credit Facility—We have ~~however, continued~~a bank credit agreement for a secured credit facility (as amended from time to ~~generate positive cash flow from operating activities during recent years and expect~~time, the “Secured Credit Facility”) that ~~such cash flow will continue~~provides us with a borrowing capacity of $774 million through June 22, 2023, which thereafter is reduced to ~~be positive during the next year.~~

~~Business combination~~—On August 13, 2017, we entered into the Transaction Agreement with Songa pursuant to which we will offer to acquire all of the issued and outstanding shares of Songa. As part of the Offer, we agreed to offer to exchange each of the issued and outstanding shares in Songa for consideration, based$600 million through its scheduled maturity on a value of NOK 47.50 per Songa share, consisting of (i) 68.6 million newly issued shares of Transocean Ltd., par value CHF 0.10 per share, and (ii) approximately $575 million aggregate principal amount of 0.5% Senior Unsecured Exchangeable Bonds to be issued by Transocean Inc. (the “Exchangeable Bonds”) exchangeable into shares of Transocean Ltd. Additionally, each Songa shareholder may elect to receive a cash payment of NOK 47.50 per Songa share up to a maximum of NOK 125,000 per shareholder in lieu of some or all of the consideration such shareholder would otherwise be entitled to receive in the Offer.June 22, 2025. The consideration, as presented in the Offer, is based on an equity value of Songa on a fully diluted basis of approximately NOK 9.1 billion and an enterprise value of approximately NOK 26.4 billion, equivalent to approximately $1.2 billion and $3.4 billion, respectively, measured as of the date of the Offer using a currency exchange ratio of NOK 7.9239 to $1.00. We also expect to (i) acquire certain outstanding bonds issued by Songa in exchange for Exchangeable Bonds, and (ii) acquire a $50 million loan made to Songa by one of its shareholders in exchange for Exchangeable Bonds. The consummation of the OfferSecured Credit Facility is subject to permitted extensions and certain early maturity triggers, including if on any date the ~~satisfaction of customary closing conditions for transactions of this type.~~

~~Debt issuances—On October 17, 2017, we completed an offering of an~~ aggregate ~~principal~~ amount of ~~$750 million~~scheduled principal repayments of ~~the 7.50% Senior Notes, and we received aggregate cash proceeds of $742 million, net of issue costs. We intend to use the majority of the net proceeds from the debt offering to repay or redeem~~indebtedness, with certain ~~maturing debt.~~

On May 5, 2017, one of our wholly owned subsidiaries completed an offering of an aggregate principal amount of $410 million of the 5.52% Senior Secured Notes, and our subsidiary received aggregate cash proceeds of $403 million, net of issue costs. On

~~- 29 -~~

~~Table of Contents~~

September 29, 2017, our subsidiary made the first of the required quarterly payments of principal and interest. Our subsidiary may redeem all or a portion of the 5.52% Senior Secured Notes at any time on or prior to December 31, 2021 at a priceexceptions, due within 91 days thereof is equal to ~~100 percent~~or in excess of ~~the aggregate principal amount plus, subject to certain exceptions related to the drilling contract for~~ ~~Deepwater Conqueror~~, a make‑whole amount. Our subsidiary will be required to redeem or to offer to redeem the notes at a price equal to 100 percent of the aggregate principal amount, and, under certain circumstances, the payment of a make‑whole amount, upon the occurrence of certain events related to ~~Deepwater Conqueror~~ ~~and the related drilling contract.~~

On October 19, 2016 and December 8, 2016, we completed an offering of an aggregate principal amount of $600 million of the 7.75% Senior Secured Notes due October 2024 (the “7.75% Senior Secured Notes”) and $625 million of the 6.25% Senior Secured Notes due December 2024 (the “6.25% Senior Secured Notes”), respectively, and we received aggregate cash proceeds of $583$200 million and $609 million, respectively, net of initial discount and issue costs. We are required to make semi‑annual payments of interest and principal on these notes. The indentures that govern the 7.75% Senior Secured Notes and the 6.25% Senior Secured Notes contain covenants that limit the ability of our subsidiaries that own or operate the ultra‑deepwater floaters ~~Deepwater Thalassa~~ ~~and~~ ~~Deepwater Proteus~~ to declare or pay dividends and impose a maximum collateral rig leverage ratio (“Maximum Collateral Ratio”), represented by each rig’s earnings relative to the debt balance, which changes over the terms of the notes. At September 30, 2017, the Maximum Collateral Ratio under both indentures was 5.75 to 1.00, and the collateral leverage ratio of each subsidiary wasavailable cash is less than ~~5.00 to 1.00.~~

On July 21, 2016, we completed an offering of an aggregate principal amount of $1.25 billion of the 9.00% Senior Notes due July 2023, and we received aggregate cash proceeds of $1.21 billion, net of initial discount and issue costs. We used the majority of the net proceeds from the debt offering to complete the 2016 Tender Offers.

~~Debt tender offers~~—On July 11, 2017, we completed the 2017 Tender Offers to purchase for cash up to $1.5 billion aggregate principal amount of the 2017 Tendered Notes. As a result, we received valid tenders from holders of an aggregate principal amount of $1.2 billion of the 2017 Tendered Notes, and we made an aggregate cash payment of $1.3 billion to settle the 2017 Tendered Notes.

On August 1, 2016, we completed the 2016 Tender Offers to purchase for cash up to $1.0 billion aggregate principal amount of certain of our outstanding senior notes (collectively, the “2016 Tendered Notes”). As a result of the 2016 Tender Offers, we received valid tenders from holders of an aggregate principal amount of $981 million of the 2016 Tendered Notes, and in the year ended December 31, 2016, we made an aggregate cash payment of $876 million to settle the 2016 Tendered Notes.

~~Debt repurchases and redemptions~~—In November 2017, we expect to redeem the outstanding 6.00% Senior Notes due March 2018 and the 7.375% Senior Notes due April 2018 with aggregate principal amounts of $319 million and $82 million, respectively, by making an aggregate cash payment of approximately $410 million using proceeds from the issuance of the 7.50% Senior Notes.

~~In the nine months ended September 30, 2017, we repurchased in the open market an aggregate principal amount of $147 million of our debt securities for an aggregate cash payment of $147~~$250 million. ~~In the year ended December 31, 2016, we repurchased in the open market an aggregate principal amount of $399 million of our debt securities for an aggregate cash payment of $354 million.~~

~~Debt scheduled maturities~~—On the scheduled maturity date of October 16, 2017, we made a cash payment of $152 million to repay the outstanding 2.50% Senior Notes due October 2017, at a price equal to 100 percent of the aggregate principal amount. On the scheduled maturity date of December 15, 2016, we made a cash payment of $938 million to repay the outstanding 5.05% Senior Notes due December 2016, at a price equal to 100 percent of the aggregate principal amount.

~~Revolving credit facility~~—In June 2014, we entered into an amended and restated bank credit agreement, which established a $3.0 billion unsecured five‑year revolving credit facility, which is scheduled to expire on June 28, 2019 (the “Five‑Year Revolving Credit Facility”). Among other things, the Five‑Year Revolving Credit Facility includes limitations on creating liens, incurring subsidiary debt, transactions with affiliates, sale/leaseback transactions, mergers and the sale of substantially all assets. The ~~Five‑Year Revolving~~Secured Credit Facility also ~~includes~~permits us to increase the aggregate amount of commitments by up to $250 million. The Secured Credit Facility is secured by, among other things, a ~~covenant imposing~~lien on nine of our ultra-deepwater floaters and two of our harsh environment floaters. The Secured Credit Facility contains covenants that, among other things, include maintenance of a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0, a maximum debt to ~~tangible~~ capitalization ratio of ~~0.6~~0.60 to ~~1.0. At September 30, 2017,~~1.00 and minimum liquidity of $500 million. The Secured Credit Facility also restricts the ability of Transocean Ltd. and certain of our ~~debt~~subsidiaries to, ~~tangible capitalization ratio, as defined, was 0.36~~among other things, merge, consolidate or otherwise make changes to ~~1.0.~~ the corporate structure, incur liens, incur additional indebtedness, enter into transactions with affiliates and pay dividends and other distributions.

In order to ~~borrow or have letters of credit issued under~~utilize the ~~Five‑Year Revolving~~Secured Credit Facility, we must, at the time of the borrowing request, ~~not~~ be in ~~default under~~full compliance with the ~~bank credit agreements~~terms and conditions of the Secured Credit Facility and make certain representations and warranties, including with respect to compliance with laws and solvency, to the ~~lenders, but we are not required to make any representation to the lenders as to the absence of a material adverse effect.~~lenders. Repayment of borrowings under the ~~Five‑Year Revolving~~Secured Credit Facility isare subject to acceleration upon the occurrence of an event of default. WeUnder the agreements governing certain of our debt and finance lease, we are also subject to various covenants, ~~under the indentures pursuant to which our public debt was issued,~~ including restrictions on creating liens, engaging in ~~sale/~~sale and leaseback transactions and engaging in certain merger, consolidation or reorganization transactions. A default under our public debt indentures, the agreements governing our ~~capital~~senior secured notes, our finance lease contract or any other debt owed to unaffiliated entities that exceeds $125 million could trigger a default under the ~~Five‑Year Revolving~~Secured Credit Facility and, if not waived by the lenders, could cause us to lose access to the ~~Five‑Year Revolving~~Secured Credit Facility.

We may borrow under the Five‑Year Revolving Credit Facility at either (1) the adjusted London Interbank Offered Rate plus a margin (the “Five‑Year Revolving Credit Facility Margin”), which ranges from 1.125 percent to 2.0 percent based on the Debt Rating, or (2) the base rate specified in the credit agreement plus the Five‑Year Revolving Credit Facility Margin, less one percent per annum. Throughout the term of the Five‑Year Revolving Credit Facility, At April 25, 2023, we pay a facility fee on the daily unused amount of the underlying commitment which ranges from 0.15 percent to 0.35 percent based on our Debt Rating. At October 24, 2017, based on our Debt Rating on that date, the Five‑Year Revolving Credit Facility Margin was 2.0 percent and the facility fee was 0.35 percent. At October 24, 2017, we

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~~Table of Contents~~

had no borrowings outstanding, no$8 million of letters of credit issued, and ~~$3.0 billion~~we had $765 million of available borrowing capacity under the ~~Five‑Year Revolving~~Secured Credit Facility.

~~Litigation settlements~~Debt issuances—~~On May 29, 2015,~~In January 2023, we issued $525 million aggregate principal amount of 8.375% Senior Secured Notes, and we received $516 million aggregate cash proceeds, net of issue costs. The 8.375% Senior Secured Notes are secured by the assets and earnings associated with the ultra-deepwater floater Deepwater Titan and the equity of the wholly owned subsidiary that owns or operates the collateral rig. Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements. We may redeem all or a portion of the 8.375% Senior Secured Notes on or prior to February 1, 2025 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

In January 2023, we issued $1.175 billion aggregate principal amount of 8.75% Senior Secured Notes, and we received $1.149 billion aggregate cash proceeds, net of issue costs. The 8.75% Senior Secured Notes are secured by a lien on the ultra-deepwater floaters Deepwater Pontus, Deepwater Proteus and Deepwater Thalassa and the harsh environment floaters Transocean Enabler and

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Transocean Encourage, together with certain related assets. Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements.

Early debt retirement—In January 2023, in connection with the ~~Plaintiff Steering Committee, (the “PSC”)~~issuance of the 8.75% Senior Secured Notes, we ~~filed~~made an aggregate cash payment of $1.156 billion, including a ~~settlement agreement (the “PSC Settlement Agreement”) in which we agreed~~make-whole premium, to ~~pay a total~~redeem the remaining outstanding $311 million, $240 million, $250 million, and $336 million aggregate principal amount of ~~$212 million, plus up to $25 million for partial reimbursement of attorneys’ fees, to resolve (1) punitive damages claims of private plaintiffs, businesses,~~the 5.875% Senior Secured Notes, the 7.75% Senior Secured Notes, the 6.25% Senior Secured Notes and local governments and (2) certain claims that BP plc. (together with its affiliates, “BP”) had made against us and had assigned to private plaintiffs who previously settled economic damages claims against BP. On February 15, 2017, the ~~U.S. District Court for~~6.125% Senior Secured Notes, respectively. In the Eastern District of Louisiana (the “MDL Court”) entered a final order and judgement approving the PSC Settlement Agreement, which is no longer subject to appeal. In June 2016 and August 2015,three months ended March 31, 2023, we made a cash ~~deposit~~payment of ~~$25~~$243 million ~~and $212 million, respectively, into~~to redeem an ~~escrow account pending approval~~equivalent aggregate principal amount of the ~~settlement by~~outstanding 5.375% Senior Secured Notes, and as a result, the ~~MDL Court. As of October 24, 2017,~~noteholders subsequently released the ~~aggregate~~mortgages on the secured rigs and $40 million from the restricted cash ~~balance of our escrow accounts was $237 million.~~account.

~~Noncontrolling interest~~Share issuance—In the year ended December 31, ~~2016, Transocean Partners LLC (“Transocean Partners”) declared~~2022, we received aggregate cash proceeds of $263 million, net of issue costs, for the aggregate sale of 61.0 million shares under the at-the-market equity offering program.

Equity and ~~paid~~debt investments—In the year ended December 31, 2022, we made an aggregate ~~distribution~~cash investment of ~~$99~~$25 million in the equity of certain unconsolidated affiliates that own drilling units, including a cash contribution of $15 million to Liquila Ventures Ltd. (“Liquila”), which ~~$28~~was used by Liquila to make the initial payment to the shipyard to acquire the ultra-deepwater drillship Deepwater Aquila, and an additional cash contribution of $10 million ~~was paid~~ to ~~holders~~Orion Holdings (Cayman) Limited.

We also invest in the equity and debt of certain other unconsolidated affiliates that are involved in researching and developing technology to improve efficiency, reliability, sustainability and safety in drilling and other activities. In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia and related assets, with an estimated fair value of $85 million, in exchange for a noncontrolling ~~interest.~~ ~~On December 9, 2016, Transocean Partners completed~~ownership interest in GSR, a ~~merger with one~~Belgian company and leading developer of ~~our subsidiaries as contemplated under~~nodule collection technology, which is engaged in the ~~Agreement~~development and ~~Plan~~exploration of ~~Merger, dated as of July 31, 2016. Following~~deep-sea polymetallic nodules that contain metals critical to the growing renewable energy market. We also hold an equity investment in Nauticus Robotics, Inc., a company that develops highly sophisticated, ultra-sustainable marine robots and intelligent software to power them, which, following the completion of ~~the merger, Transocean Partners~~a business combination with a publicly traded special purpose acquisition company in September 2022, became a ~~wholly owned indirect subsidiary~~publicly listed company, the common shares of ~~Transocean~~which trade on the NASDAQ exchange under the ticker symbol “KITT.” Additionally, we hold equity and debt investments in Ocean Minerals LLC, the parent company of Moana Minerals Ltd. ~~Each Transocean Partners common unit~~, a Cook Islands subsea resource development company that ~~was issued~~intends to extract polymetallic nodules, and ~~outstanding immediately prior~~we retain a priority right to provide the deepwater nodule extraction services for the company.

Shipyard financing arrangement—We established the 4.50% shipyard loans due September 2027 (each, a “Shipyard Loan”, and together, the “Shipyard Loans”) to finance all or a portion of the final payments expected to be owed to the ~~closing,~~shipyard upon delivery of the ultra-deepwater floaters Deepwater Atlas and Deepwater Titan. In June 2022, we borrowed $349 million under one of the Shipyard Loans and made a cash payment of $46 million to satisfy the final milestone payment due upon delivery of Deepwater Atlas. In December 2022, we borrowed $90 million under the other ~~than units held~~Shipyard Loan and made a cash payment of $325 million to satisfy the final milestone payment due upon delivery of Deepwater Titan. Borrowings under the Shipyard Loan for Deepwater Atlas are secured by, ~~Transocean and its subsidiaries, was converted into~~among other security, a lien on the rig. Borrowings under the Shipyard Loan for Deepwater Titan are unsecured. We have the right to ~~receive 1.20~~prepay the outstanding borrowings, in full or in part, without penalty. The Shipyard Loans contain covenants that, among other things, limits the ability of the subsidiary owners of the drilling rigs to incur certain types of additional indebtedness or make certain additional commitments or investments.

Exchangeable bonds—The indentures that govern the 4.00% senior guaranteed exchangeable bonds due December 2025 (the “4.00% Senior Guaranteed Exchangeable Bonds”), 2.50% senior guaranteed exchangeable bonds due January 2027 and the 4.625% Senior Guaranteed Exchangeable Bonds each requires such bonds to be repurchased upon the occurrence of certain fundamental changes and events, at specified prices depending on the particular fundamental change or event, which include changes and events related to certain (i) change of control events applicable to Transocean Ltd. or Transocean Inc., (ii) the failure of our ~~shares. To complete~~shares to be listed or quoted on a national securities exchange and (iii) specified tax matters. Additionally, the ~~merger, we issued 23.8 million~~4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds, if exchanged by holders, may be settled in cash, Transocean Ltd. shares ~~from conditional capital.~~or a combination of cash and Transocean Ltd. shares, at our election.

Share repurchase program—In May 2009, at our annual general meeting, our shareholders approved and authorized our board of directors, at its discretion, to repurchase anfor cancellation any amount of our shares for ~~cancellation with~~ an aggregate purchase price of up to CHF ~~3.5~~3.50 billion. On February 12, 2010, our board of directors authorized our management to implement the share repurchase program. At March 31, 2023, the authorization remaining under the share repurchase program was for the repurchase of our outstanding shares for an aggregate purchase price of up to CHF 3.24 billion, equivalent to $3.54 billion. We intend to fund any repurchases using available cash balances and cash from operating activities. ~~Based upon~~The share repurchase program could be suspended or discontinued by our board of directors or company management, as applicable, at any time. We may decide, based on our ongoing capital requirements, the price of our shares, regulatory and tax considerations, cash flow generation, the amount and duration of our contract backlog, general market conditions, debt ~~ratings~~rating considerations and other factors, that we ~~may elect to~~should retain cash, reduce debt, make capital investments or acquisitions or otherwise use cash for general corporate ~~purposes, and consequently, we may elect not to repurchase any additional shares under this program.~~purposes. Decisions regarding the amount, if any, and timing of any share repurchases will be made from time to time based ~~upon~~on these factors. Any repurchased shares under the share repurchase program would be held by us for cancellation by the shareholders at a future general meeting of shareholders. ~~The share repurchase program could be suspended or discontinued by our board of directors or company management, as applicable, at any time. In the nine months ended September 30, 2017~~

Contractual obligations and the year ended December 31, 2016, we did not purchase shares under our share repurchase program. At October 24, 2017, the authorization remaining under the share repurchase program was for the repurchase of up to CHF 3.2 billion, equivalent to approximately $3.3 billion, of our outstanding shares.

~~Contractual obligations~~other commercial commitments—As of ~~September 30, 2017,~~March 31, 2023, with exception toof the following, there have been no material changes to ~~the~~our contractual obligations or other commercial commitments as previously disclosed in ~~“Item~~“Part II. Item 7.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016:~~2022.

For the twelve months ending September 30,


Total

2018

2019 - 2020

2021 - 2022

Thereafter

(in millions)

Contractual obligations

Debt

$
6,838

$
780

$
415

$
1,003

$
4,640

Interest on debt

4,396

471

877

762

2,286

Purchase obligations

914

93

402

419

—

Service agreement obligations (a)

805

54

144

163

444

Total

$
12,953

$
1,398

$
1,838

$
2,347

$
7,370

~~(a)~~

In the year ended December 31, 2016, we entered into long‑term service agreements with certain original equipment manufacturers to provide services and parts related to our pressure control systems. In the nine months ended September 30, 2017, we entered into similar long‑term service agreements related to thrusters, top drives and other equipment. The future payments required under our service agreements were estimated based on our projected operating activity and may vary based on actual operating activity.

~~Other commercial commitments~~—As of September 30, 2017, there have been no material changes to the commercial commitments as previously disclosed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10‑K for the year ended December 31, 2016.

~~- 31 -~~

Twelve months ending March 31,


Total

2024

2025 - 2026

2027 - 2028

Thereafter

(in millions)

Debt

$
7,468

$
305

$
2,165

$
2,667

$
2,331

Interest on debt

2,604

461

822

481

840

Total

$
10,072

$
766

$
2,987

$
3,148

$
3,171

~~Table of Contents~~

Drilling fleet

Expansion—From time to time, we review possible acquisitions of businesses and drilling rigs, as well as noncontrolling interests in other companies, and we may make significant future capital commitments for such purposes. We may also consider investments related to major rig upgrades, new rig construction, or the acquisition of a rig under construction. ~~We may commit to~~Any such ~~investment without first obtaining customer contracts. Any~~ acquisition ~~upgrade~~ or ~~new rig construction~~investment could involve the payment by us of a substantial amount of cash or the issuance of a substantial number of additional shares or other securities. Our failure to subsequently secure drilling contracts ~~for rigs under construction~~in these instances, if not already secured, could have an adverse effect on our results of operations or cash flows.

On August 13, 2017, we entered into the Transaction Agreement with Songa pursuant to which we will offer to acquire all of the issued and outstanding shares of Songa, subject to certain conditions, through the Offer. At October 24, 2017, Songa owned and operated seven mobile offshore drilling units, including four harsh environment floaters and three midwater floaters. See Notes to Condensed Consolidated Financial Statements—Note 4—Business Combination and “—Liquidity and Capital Resources—Sources and uses of liquidity.”

In the ~~nine months~~year ended ~~September 30, 2017,~~December 31, 2022, we made ~~capital expenditures~~a cash contribution of ~~$386~~$15 million ~~including capitalized interest~~to Liquila, which represented our proportionate contribution that was used to make the initial payment to the shipyard to acquire the newbuild ultra-deepwater drillship Deepwater Aquila for a purchase price of ~~$91~~approximately $200 million. ~~We only capitalize interest costs during periods in which progress for construction projects continues~~The seventh generation, high-specification drillship is designed to be ~~underway. As~~equipped with our patented dual activity, a 1,400 short-ton hookload, large deck space, high load capacities and will be dual-stack ready. We maintain the exclusive right to market and manage the operations of ~~September 30, 2017, we had ceased capitalization~~the rig, which is expected to be delivered from the shipyard in the third quarter of ~~interest costs on our two uncontracted newbuilds due to a pause in construction.~~ 2023.

The historical and projected capital expenditures and ~~other~~non-cash capital additions ~~including capitalized interest,~~ for our ongoing ~~major~~newbuild construction ~~projects~~project were as follows:


			Total costs		Expected
			for the		costs for the
	Total costs		three months		nine months		Total
	through		ended		ending		estimated
	December 31,		March 31,		December 31,		costs at
	2022		2023		2023		completion

	(in millions)
Deepwater Titan (a)	$	1,052	$	49	$	74	$	1,175
Deepwater Atlas (b)		954		16		45		1,015
Total	$	2,006	$	65	$	119	$	2,190

Total costs

Expected

for the

costs for the

Total costs

nine months

three months

Total

through

ended

ending

estimated

December 31,

September 30,

December 31,

For the years ending December 31,

costs


2016

2017

2017

2018

2019

2020

at completion

(In millions)

Deepwater Pontus (a)

$
745

$
134

$
21

$
—

$
—

$
—

$
900

Deepwater Poseidon (b)

707

99

77

27

—

—

910

Ultra-Deepwater drillship TBN1 (c)

221

31

13

27

56

472

820

Ultra-Deepwater drillship TBN2 (c)

166

30

4

19

38

513

770

Total

$
1,839

$
294

$
115

$
73

$
94

$
985

$
3,400

(a)

~~(a)~~

~~In October 2017, the ultra‑deepwater floater~~ Deepwater ~~Pontus~~ ~~was placed into service and commenced operations.~~

~~(b)~~

~~Deepwater Poseidon, a newbuild ultra‑deepwater~~Titan is an ultra-deepwater drillship under ~~construction at~~construction. In December 2022, we took delivery of Deepwater Titan from the ~~Daewoo Shipbuilding & Marine Engineering Co. Ltd.~~ shipyard, equipped with two 20,000 pounds per square inch blowout preventers and other equipment required by our customer. The projected capital additions include estimates for the mobilization and customer acceptance in ~~Korea,~~the U.S. Gulf of Mexico. The rig is expected to commence operations ~~in the first quarter of 2018.~~

~~(c)~~

~~Our two unnamed ultra‑deepwater drillships~~ under ~~construction at the Jurong Shipyard Pte Ltd. in Singapore do not yet have~~its drilling ~~contracts and are expected to be delivered~~contract in the second quarter of ~~2020~~2023.

(b)

In October 2022, we completed construction of the ultra-deepwater drillship Deepwater Atlas, and it commenced the ~~fourth~~first of two phases of operations using a 15,000 pounds per square inch blowout preventer. Before the start of the second phase of operations, the rig will undergo installation of a 20,000 pounds per square inch blowout preventer and related equipment, which is expected to be commissioned in the third quarter of 2020, respectively. The delivery expectations and the cost projections presented above reflect the terms of our construction agreements, as amended to delay delivery in consideration of current market conditions.

2023.

The ultimate amount of our capital expenditures is partly dependent upon financial market conditions, the actual level of operational and contracting activity, the costs associated with the current regulatory environment and customer requested capital improvements and equipment for which the customer agrees to reimburse us. As with any major shipyard project that takes place over an extended period of time, the actual costs, the timing of expenditures and the project completion date may vary from estimates based on numerous factors, including actual contract terms, weather, exchange rates, shipyard labor conditions, availability of suppliers to recertify equipment and the market demand for components and resources required for drilling unit construction. We intend to fund the cash requirements relating to our projected capital expenditures ~~through~~by using available cash balances, cash generated from operations and asset sales, ~~and commercial bank or capital markets financings. We also have available credit~~borrowings under ~~the Five‑Year Revolving~~our Secured Credit Facility ~~which is expected to be extended~~and financing arrangements with banks or ~~replaced with another credit facility before the expiration of the underlying bank credit agreement.~~other capital providers. Economic conditions and other factors could impact the availability of these sources of funding. See “—Sources and uses of liquidity.”

Dispositions—From time to time, we may also review the possible disposition of ~~non‑strategic~~certain drilling ~~units.~~assets. In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia and related assets with an estimated fair value of $85 million. Considering ~~recent~~ market conditions, we have previously committed to plans to sell certain ~~lower‑~~lower specification drilling units for scrap ~~value. During the nine months ended September 30, 2017,~~value, and we identified eight such drilling units that we have sold or intend to sell for scrap value. During the year ended December 31, 2016, we identified seven such drilling units that we have sold. We continue to evaluate the drilling units in our fleet and may identify additional ~~lower specification~~lower-specification drilling units to be sold for scrap, ~~value.~~recycling or alternative purposes.

Critical Accounting Policies and Estimates

~~On May 31, 2017,~~Our discussion and analysis of our financial condition, operating results and liquidity and capital resources are based upon, and should be read in conjunction with, our condensed consolidated financial statements and the notes thereto, included under “Item 1. Financial

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Table of Contents

Statements” in this quarterly report on Form 10-Q. For a discussion of the critical accounting policies and estimates that we ~~completed~~use in the ~~sale~~preparation of ~~10 high‑specification jackups~~our condensed consolidated financial statements, see “Part II. Item 7. Management’s Discussion and ~~novated the contracts relating to the construction~~Analysis of ~~five high‑specification jackups, together with related assets. In the nine months ended September 30, 2017, as a result~~Financial Condition and Results of this transaction, we received aggregate net cash proceeds of $319 million. During the nine months ended September 30, 2017, we also completed the sale of one midwater floater, along with related assets,Operations—Critical Accounting Policies and ~~we received net cash proceeds of $3 million. During~~Estimates” in our annual report on Form 10-K for the year ended December 31, ~~2016, we completed~~2022. As of March 31, 2023, there have been no material changes to the ~~sale of three deepwater floaters~~critical accounting policies and ~~eight midwater floaters, along with related assets,~~estimates on which our judgments, assumptions and ~~we received aggregate net cash proceeds of $22 million.~~estimates are based.

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~~Table of Contents~~

~~Contingencies and Uncertainties~~

~~Macondo well incident~~

A significant portion of the contingencies arising from the Macondo well incident has now been resolved as a result of settlements with the Department of Justice (the “DOJ”), BP and the states of Alabama, Florida, Louisiana, Mississippi and Texas. Additionally, we entered into the PSC Settlement Agreement, which has been approved by the MDL Court and is no longer subject to appeal. We believe the remaining most notable claims against us arising from the Macondo well incident are the 30 settlement class opt‑outs from the PSC Settlement Agreement. We can provide no assurance as to the outcome of the remaining claims arising from the Macondo well incident, the timing of any upcoming appeal or further rulings, or that we will not enter into additional settlements as to some or all of the remaining matters related to the Macondo well incident. See Notes to Condensed Consolidated Financial Statements—Note 11—Commitments and Contingencies.Other Matters

Regulatory matters

~~Consent Decree~~—Under the civil consent decree (the “Consent Decree”), we agreed to undertake certain actions, including enhanced safety and compliance actions when operating in U.S. waters. The Consent Decree also requires us to submit certain plans, reports and submissions and also requires us to make such submittals available publicly. One of the required plans is a performance plan approved on January 2, 2014, that contains, among other things, interim milestones for actions in specified areas and schedules for reports required under the Consent Decree. Additionally, in compliance with the requirements of the Consent Decree and upon approval by the DOJ, we retained an independent auditor to review and report to the DOJ our compliance with the Consent Decree and an independent process safety consultant to review, report and assist with the process safety requirements of the Consent Decree. We may request termination of the Consent Decree after January 2, 2019, provided we meet certain conditions. The Consent Decree resolved the claim by the U.S. for civil penalties under the Clean Water Act. We also agreed to pay, and have satisfied our obligations to pay, civil penalties of $1.0 billion plus interest.

For a description of other regulatory and environmental matters relating to the Macondo well incident, please see “—Macondo well incident.” See also Notes to Condensed Consolidated Financial Statements—Note 11—Commitments and Contingencies.

~~Tax matters~~

We conduct operations through our various subsidiaries in a number of countries throughout the world. Each country has its own tax regimes with varying nominal rates, deductions and tax attributes. From time to time, we may identify changes to previously evaluated tax positions that could result in adjustments to our recorded assets and liabilities. Although we are unable to predict the outcome of these changes, we do not expect the effect, if any, resulting from these adjustments to have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.

We file federal and local tax returns in several jurisdictions throughout the world. Tax authorities in certain jurisdictions are examining our tax returns and in some cases have issued assessments. We are defending our tax positions in those jurisdictions. While we cannot predict or provide assurance as to the final outcome of these proceedings, we do not expect the ultimate liability to have a material adverse effect on our condensed consolidated statement of financial position or results of operations, although it may have a material adverse effect on our condensed consolidated statement of cash flows.

~~See Notes to Condensed Consolidated Financial Statements—Note 7—Income Taxes.~~

~~Other matters~~

~~In addition, from time to time, we~~occasionally receive inquiries from governmental regulatory agencies regarding our operations around the world, including inquiries with respect to various tax, environmental, regulatory and compliance matters. To the extent appropriate under the circumstances, we investigate such matters, respond to such inquiries and cooperate with the regulatory agencies. See Notes to Condensed Consolidated Financial Statements—Note 9—Contingencies.

Tax matters

~~Critical Accounting Policies and Estimates~~

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements. This discussion should be read in conjunction with disclosures included in the notes to our condensed consolidated financial statements related to estimates, contingencies and other accounting policies. We disclose our significant accounting policies in Note 2 to our condensed consolidated financial statements in this quarterly report on Form 10‑Q and in Note 2 to our consolidated financial statements in our annual report on Form 10‑K for the year ended December 31, 2016.

We ~~prepare~~conduct operations through our ~~condensed consolidated financial statements~~various subsidiaries in ~~accordance~~countries throughout the world. Each country has its own tax regimes with ~~accounting principles generally accepted in the U.S.,~~varying statutory rates, deductions and tax attributes, which ~~require~~are subject to changes resulting from new legislation, interpretation or guidance. From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to ~~make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent~~adjust our recorded tax assets and liabilities. ~~On an ongoing basis,~~Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments. We intend to defend our tax positions vigorously. Although we ~~evaluate our estimates, including those related~~can provide no assurance as to our allowance for doubtful accounts, materials and supplies obsolescence, property and equipment, income taxes, defined benefit pension plans and other postretirement employee benefits and contingent liabilities. These estimates require significant judgments and assumptions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the

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~~circumstances,~~ the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

~~For a discussion~~outcome of the ~~critical accounting policies and estimates that~~aforementioned changes, examinations or assessments, we ~~use in~~do not expect the preparation of our condensed consolidated financial statements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our annual report on Form 10‑K for the year ended December 31, 2016. We have discussed the development, selection and disclosure of these critical accounting policies and estimates with the audit committee of our board of directors. During the nine months ended September 30, 2017, there have been no material changes to the types of judgments, assumptions and estimates upon which our critical accounting estimates are based.

~~New Accounting Pronouncements~~

~~For a discussion of the new accounting pronouncements that have had or are expected~~ultimate liability to have ana material adverse effect on our condensed consolidated statement of financial ~~statements, see~~position or results of operations; however, it could have a material adverse effect on our condensed consolidated statement of cash flows. See Notes to Condensed Consolidated Financial Statements—Note 3—New Accounting Pronouncements in this quarterly report on Form 10‑Q and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10‑K for the year ended December 31, 2016.7—Income Taxes.

~~Item 3.Quantitative and Qualitative Disclosures About Market Risk~~

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Overview—We are exposed to interest rate risk, ~~and~~primarily associated with our long-term debt, including current maturities. Additionally, we are exposed to currency exchange rate risk ~~primarily associated with our long‑term and short‑term debt, our restricted cash balances and investments and~~related to our international operations. For a complete discussion of our interest rate risk and currency exchange rate risk, see ~~“Item~~“Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016. With exception to the following there have been no material changes to these previously reported matters during the nine months ended September 30, 2017.~~2022.

~~For our debt instruments, the~~Interest rate risk—The following table presents the ~~principal cash flows~~scheduled installment amounts and related ~~weighted‑average~~weighted-average interest rates of our long-term debt instruments by contractual maturity date. The expected maturity amounts, presented below, include both principal and other installments, representing the contractual interest payments resulting from previously restructured debt. The following table presents information as of March 31, 2023 for the ~~12‑month~~12-month periods ending ~~September 30~~March 31 (in millions, except interest rate percentages):


	Scheduled Maturity Date (a)
	2018			2019			2020			2021			2022			Thereafter			Total		Fair Value

																							Twelve months ending March 31,
																							2024			2025			2026			2027			2028			Thereafter			Total		Fair value
Debt
Fixed rate (USD)	$	780		$	236		$	244		$	543		$	537		$	5,016		$	7,356	$	7,388	$	305		$	432		$	1,733		$	2,225		$	442		$	2,331		$	7,468	$	7,208
Average interest rate		6.02	%		6.57	%		6.57	%		6.53	%		7.79	%		7.61	%						5.80	%		5.90	%		6.46	%		4.42	%		8.10	%		7.35	%

~~(a)~~

~~Expected maturity amounts are based on the face value of debt.~~

~~Interest rate risk~~—At ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the fair value of our ~~United States “(U.S.”) dollar‑denominated~~outstanding debt ~~presented above,~~ was ~~$7.4~~$7.21 billion and ~~$8.1~~$6.41 billion, respectively. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023, the fair value of ~~such~~our debt ~~decreased~~increased by ~~$0.7 billion~~$796 million due to the following: (a) an increase of $1.74 billion due to the issuance of the 8.375% senior secured notes due February 2028 and the 8.75% senior secured notes due February 2030, (b) a net increase of $569 million resulting from changes in the market prices of our outstanding debt, partially offset by (c) a decrease of ~~approximately $1.5~~$1.36 billion ~~resulting from the retirement of $1.5 billion aggregate principal amount of debt~~ due to ~~cash tender offers, open market repurchases~~early retirements and (d) a decrease of $150 million due to scheduled maturities, partially offset by (b) an increase of approximately $406 million resulting from the issuance of $410 million aggregate principal amount of the 5.52% Senior Secured Notes due May 2022, and (c) an increase of approximately $380 million resulting from the change in market prices for our outstanding U.S. dollar‑denominated debt.repayments.

Item 4.

Controls and Procedures

~~Item 4.Controls and Procedures~~

Disclosure controls and procedures—We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in the Exchange Act, Rules 13a‑15 and 15d‑15, as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the United States (the “U.S.”) Securities Exchange Act of 1934 is (1) accumulated and communicated to our management, including our Chief Executive Officer, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial officer, to allow timely decisions regarding required disclosure and (2) recorded, processed, summarized and reported within the time periods specified in the ~~United States (“~~U.S.”) Securities and Exchange Commission’s rules and forms. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that ~~due to the material weakness in internal control over financial reporting as set forth below,~~ our disclosure controls and procedures were ~~not~~ effective as of ~~September 30, 2017.~~March 31, 2023.

Internal control over financial reporting—In the course of the external audit of the consolidated financial statements for the year ended December 31, 2016, and of our related control over financial reporting, errors resulting from the deficient controls described below were identified for which correction of the cumulative error would have been material to the 2016 financial statements, but which was not material to any of our previously issued consolidated financial statements. The errors did not result in a material misstatement in our prior financial statements and therefore did not require our previously filed reports to be amended. However, as a result of the significance of the cumulative accounting errors resulting from the deficient controls, we revised our financial statements for 2014 and 2015 and the

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interim financial statements in 2016 and 2015. The corrections of prior year financial statements for 2014 and 2015 are included in the consolidated financial statements for the year ended December 31, 2016, that are included in our annual report on Form 10‑K, filed on March 7, 2017.

In connection with the errors, we evaluated the deficiencies in our internal controls over financial reporting and determined our internal control over financial reporting as of December 31, 2016, was not effective due to a material weakness in our controls over income tax accounting. Specifically, the execution of the controls over the application of the accounting literature to the measurement of deferred taxes did not operate effectively in relation to: (1) the remeasurement of certain nonmonetary assets in Norway, (2) the analysis of our U.S. defined benefit pension plans and effect on other comprehensive income and (3) the assessment of the realizability of our deferred tax assets, and the need for valuation allowances. The matters were discovered during the course of the 2016 external audit of the accounts and related controls.

Notwithstanding the material weakness described above and after having performed additional procedures, management has concluded that the condensed consolidated financial statements in this quarterly report on Form 10‑Q fairly present, in all material respects, our financial position, results of operations and cash flows for all periods and dates presented.

~~Remediation efforts to address material weakness~~—Management is committed to the planning and implementation of remediation efforts to address this material weakness. These remediation efforts, summarized below, which are either implemented or in process, are intended to both address the identified material weakness and to enhance our overall financial control environment. In this regard, our initiatives include:

~~Add additional personnel and resources with the appropriate level of tax accounting experience~~

~~Invest in additional technical tax accounting training~~

~~Enhance integration and documentation standards within and between tax and other key departments~~

We are in the process of remediating this material weakness by executing upon the above actions. Management believes the ongoing efforts will effectively remediate the material weakness. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. As we continue to monitor the effectiveness of our internal control over financial reporting in the area affected by the material weakness, we are performing additional procedures, including the use of manual mitigating control procedures, where necessary, and have employed any additional resources deemed necessary to provide assurance that our financial statements continue to be fairly stated in all material respects. As we continue to evaluate and work to improve our internal control over financial reporting, management may execute additional measures to address potential control deficiencies or modify the remediation plan described above. Management will continue to review and may make necessary changes to the overall design of our internal controls.

~~Changes in internal control over financial reporting~~—There were no changes to our internal control over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, except the changes related to executing our ongoing remediation efforts as noted above. We have not yet reached a conclusion as to the effectiveness of our remediation efforts enacted to date, as the effectiveness of such remediation efforts will be subject to internal controls testing and assessment for our evaluation of internal control over financial reporting as of December 31, 2017.

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reporting.

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Table of Contents

PART ~~II.OTHER INFORMATION~~II. Other Information

~~Item 1.Legal Proceedings~~
Item 1.
Legal Proceedings

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us,” or “our”) has certain actions, claims and other matters pending as discussed and reported in “Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note ~~13—~~12—Commitments and Contingencies” and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—~~Contingencies and Uncertainties—Macondo well incident”~~Other Matters—Regulatory matters” in our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016.~~2022. We are also involved in various tax matters as described in “Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 7—10—Income Taxes” and in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—~~Contingencies and Uncertainties—~~Other Matters—Tax matters” in our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016.~~2022. All such actions, claims, tax and other matters are incorporated herein by reference.

As of ~~September 30, 2017,~~March 31, 2023, we were ~~also~~ involved in a number of other lawsuits, regulatory matters, disputes and claims, asserted and ~~disputes,~~unasserted, all of which have arisen in the ordinary course of our business and for which we do not expect the liability, if any, to have a material adverse effect on our ~~condensed~~ consolidated ~~statement of~~ financial position, results of operations or cash flows. We cannot predict with certainty the outcome or effect of any of the matters referred to above or of any such other pending, threatened or ~~threatened~~possible litigation or legal proceedings. ~~There~~We can beprovide no assurance that our beliefs or expectations as to the outcome or effect of any lawsuit or claim or dispute will prove correct, and the eventual outcome of these matters could materially differ from management’s current estimates.

On December 17, 2021, Transocean Offshore Deepwater Drilling Inc., our wholly owned subsidiary, received a letter from the United States (the “U.S.”) Department of Justice (the “DOJ”) related to alleged violations by our subsidiary of its Clean Water Act (“CWA”) National Pollutant Discharge Elimination System permit (“Permit”). The alleged violations, involving seven of our drillships, were identified by the U.S. Environmental Protection Agency (“EPA”) following an initial inspection in 2018 of our compliance with the Permit and the CWA and relate to deficiencies with respect to records retention, reporting requirements, discharges, permit limits, inspections and maintenance, and the submission of monitoring reports. In connection with the initial EPA inspection, we initiated modifications to our Permit and CWA compliance processes and maintained a dialogue with the EPA regarding the design and implementation of enhancements to these processes. At the DOJ’s invitation, in an effort to resolve the matter, we initiated settlement discussions with the DOJ, which remain ongoing, and the enforcement action will likely result in our agreeing to take or continue to take certain corrective actions to ensure current and future Permit and CWA compliance and to pay a monetary penalty, which we believe at this time would be immaterial. We do not believe that the enforcement action would have a material adverse effect on our consolidated financial position, results of operations or cash flow. If our current expectations relating to these costs prove to be inaccurate, future expenditures may exceed our accrued amounts.

In addition to the legal proceedings described above, we may from time to time identify other matters that we monitor through our compliance program ~~and~~or in response to events arising generally within our industry and in the markets where we do business. ~~For example,~~We evaluate matters on a case by case basis, investigate allegations in the year ended December 31, 2015, we began investigating statements made by a former employee of Petróleo Brasileiro S.A. (“Petrobras”) related to the award to us of a drilling services contract in Brazil. These statements were made in connection with an ongoing criminal investigation by the Brazilian authorities into Petrobras and certain other companies and individuals. We have completed our internal investigation, and we have not identified any wrongdoing by any of our employees or agents in connectionaccordance with our business. We have voluntarily met with governmental authorities in the United States to discuss the statements made by the former Petrobras employee and our internal investigation, as well as our findings. We will continue to investigate these types of allegationspolicies and cooperate with applicable governmental authorities. Through the process of monitoring and proactive investigation, we strive to ensure no violation of our policies, Code of Integrity or law has occurred or will occur; however, ~~there~~we can beprovide no assurance as to the outcome of these matters.

Item 1A.

Risk Factors

~~Item 1A.Risk Factors~~

~~With exception to the following, there~~There have been no material changes to the risk factors as previously disclosed in ~~“Item~~“Part I. Item 1A. Risk Factors” in our annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2016.~~2022.

~~The expected benefits associated with a combination with the Songa may not be realized.~~

Following the completion of the voluntary offer (the “Offer”) to acquire Songa Offshore SE and its subsidiaries (collectively, “Songa”), we intend to integrate these companies into the Transocean group. There can be no assurances that we will not encounter difficulties in integrating Songa’s operations or that the benefits expected from the integration will be realized. For example, certain of Songa’s existing indebtedness and agreements include change of control or acceleration provisions that are expected to be triggered in connection with the completion of the Offer, or otherwise permits Songa debt holders to receive Songa shares after the expiration of the Offer. If we are unable to amend or obtain a waiver of these provisions from the relevant counterparties, we may be required to make payments under the terms of the indebtedness or agreements or otherwise be unable to include certain Songa shares in the Offer, which in each case may limit our ability to fully integrate Songa’s business on the timeline we currently anticipate or that may prevent us from fully realizing all of the benefits we currently anticipate from our acquisition of Songa. If the benefits are not achieved, or only partly achieved, this could adversely affect our business or our statement financial condition or results of operations.

~~The Offer is subject to conditions and the Transaction Agreement may be terminated in accordance with its terms and the Combination may not be completed.~~

The Offer is subject to numerous conditions, as defined in the transaction agreement (the “Transaction Agreement”), including the conditions related to the minimum number of Songa shares that must be validly tendered, and not subsequently validly withdrawn as of the end of the offer period, the receipt of regulatory approvals and the absence of material adverse changes with respect to Songa. No assurance can be given that all of the conditions to the Offer will be satisfied or, if they are, as to the timing of such satisfaction. If the Offer has not become or been declared unconditional before 11:59 p.m. (central European time) on January 31, 2018, either party may terminate the Transaction Agreement, unless extended in accordance with the terms of the agreement.

We must obtain governmental and regulatory approvals to consummate the Offer, which, if delayed or not granted, may delay or jeopardize the Offer and the transactions contemplated by the Transaction Agreement.

The approval of the Offer under merger control or competition law regimes in any jurisdictions where the parties to the Transaction Agreement have mutually determined merger control or competition law filings or notices to be necessary must have been

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obtained or any statutory waiting period, including any extension thereof, applicable to the Offer must have expired with the result that the Offer may be completed without the approval by any relevant antitrust authority.

The governmental and regulatory agencies from which we may be required to seek these approvals have broad discretion in administering the applicable governing regulations. As a condition to their approval of the transactions contemplated by the Transaction Agreement, those agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of our business. No assurance can be given that the approvals, if required, will be obtained or that any required conditions to the Offer will be satisfied, and, if any such required approvals are obtained and the conditions to the consummation of the Offer are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals. The Offer is subject to a regulatory condition that certain approvals are obtained. This condition may only be waived with the prior written consent of Songa.

Any delay in the completion of the transaction for regulatory reasons could diminish the anticipated benefits of the combination or result in additional transactions costs. Any uncertainty over the ability to complete the transaction could make it more difficult for us or Songa to maintain or to pursue particular business strategies. Conditions imposed by regulatory agencies in connection with their approval of the transaction may restrict our ability to modify the operations of our business in response to changing circumstances for a period of time after the closing of the Offer or its ability to expend cash for other uses or otherwise have an adverse effect on the anticipated benefits of the transaction, thereby adversely impacting the business, financial condition or results of operations of the combined company.

The announcement and pendency of the Offer and the other transactions contemplated by the Transaction Agreement, during which we and Songa are subject to certain operating restrictions, could have an adverse effect on our and Songa’s businesses and cash flows, financial condition and results of operations

The announcement and pendency of the transactions contemplated by the Transaction Agreement, including the Offer, could disrupt Songa’s and our businesses, and uncertainty about the effect of these transactions may have an adverse effect on Songa and us. These uncertainties could cause suppliers, vendors, partners and others that deal with us and Songa to defer entering into contracts with, or making other decisions concerning, us and Songa or to seek to change or cancel existing business relationships with the companies. In addition, Songa and our employees may experience uncertainty regarding their roles after the acquisition. Employees may depart either before or after the completion of the acquisition because of uncertainty and issues relating to the difficulty of coordination or because of a desire not to remain following the acquisition. Therefore, the pendency of the Offer may adversely affect Songa’s and our ability to retain, recruit and motivate key personnel. In addition, the attention of Songa’s and our management may be directed towards the completion of the acquisition, including obtaining regulatory approvals, and may be diverted from the day‑to‑day business operations of us and Songa. Matters related to the acquisition may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been beneficial to us and Songa. In addition, the Transaction Agreement requires that we and Songa refrain from taking certain specified actions while the Offer and the acquisition are pending. These restrictions may prevent us and Songa from pursuing otherwise attractive business opportunities or capital structure alternatives and from executing certain business strategies prior to the completion of the Offer. Further, the acquisition may give rise to potential liabilities, including those that may result from future shareholder lawsuits. Any of these matters could adversely affect the businesses of, or harm the results of operations, financial condition or cash flows of, us and Songa.

~~Negative publicity related to the transactions contemplated by the Transaction Agreement may materially adversely affect us and Songa~~

From time to time, political and public sentiment in connection with a proposed combination may result in a significant amount of adverse press coverage and other adverse public statements affecting us and Songa. Adverse press coverage and public statements, whether or not driven by political or popular sentiment, may also result in legal claims or in investigations by regulators, legislators and law enforcement officials. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceedings, can divert the time and effort of senior management from operating their businesses. Addressing any adverse publicity, governmental scrutiny or enforcement or other legal proceedings is time‑consuming and expensive and, regardless of the factual basis for the assertions being made, could have a negative impact on our reputation and that of Songa, on the morale of our or their employees and on our or their relationships with regulators. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on Songa’s and our respective business and cash flows, financial condition and results of operations.

~~Our share price may be adversely affected if the Offer is not completed~~

If the Offer is not completed, then our share price may decline to the extent that the current market price of our shares reflect a market premium based on the assumption that the Offer will be completed.

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~~Table of Contents~~

~~Item 2.Unregistered Sales of Equity Securities and Use of Proceeds~~
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


				Total number of shares	Approximate dollar value
	Total number	Average		purchased as part	of shares that may yet
	of shares	price paid		of publicly announced	be purchased under the plans
Period	purchased	per share		plans or programs (a)	or programs (in millions) (a)
January 2023	—	$	—	—	$	3,543
February 2023	—		—	—		3,543
March 2023	—		—	—		3,543
Total	—	$	—	—	$	3,543

Total

Maximum Number

Number of Shares

(or Approximate Dollar Value)

Total Number

Average

Purchased as Part

of Shares that May Yet Be Purchased

of Shares

Price Paid

of Publicly Announced

Under the Plans or Programs

Period

Purchased (a)

Per Share

Plans or Programs (b)

(in millions) (b)

July 2017

30

$
8.33

—

$
3,349

August 2017

—

—

—

3,349

September 2017

—

—

—

3,349

Total

30

$
8.33

—

$
3,349

(a)

~~(a)~~

The total number of shares purchased in the third quarter of 2017 consists of 30 shares withheld by us through a broker arrangement and limited to statutory tax in satisfaction of withholding taxes due upon the vesting of restricted share units awarded to our employees under our long‑term incentive plan.

~~(b)~~

In May 2009, at our annual general meeting, our shareholders approved and authorized our board of directors, at its discretion, to repurchase anfor cancellation any amount of our shares for ~~cancellation with~~ an aggregate purchase price of up to CHF ~~3.5~~3.50 billion. At March 31, 2023, the authorization remaining under the share repurchase program was for the repurchase of our outstanding shares for an aggregate purchase price of up to CHF 3.24 billion, equivalent to ~~approximately $3.6~~$3.54 billion. ~~On February 12, 2010,~~The share repurchase program could be suspended or discontinued by our board of directors ~~authorized our~~or company management, to implement the share repurchase program. We may decide, based upon our ongoing capital requirements, the price of our shares, regulatory and tax considerations, cash flow generation, the amount and duration of our contract backlog, general market conditions, debt rating considerations and other factors, that we should retain cash, reduce debt, make capital investments or acquisitions or otherwise use cash for general corporate purposes. Decisions regarding the amount, ifas applicable, at any ~~and timing of any share repurchases would be made from time to time based upon these factors.~~time. See “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources and uses of liquidity.”

~~Item 4.Mine Safety Disclosures~~- 24 -

Table of Contents

~~Not applicable.~~

~~Item 6Exhibits~~

~~(a)~~

Item 6.

Exhibits

(a)

Exhibits

The following exhibits are filed in connection with this ~~Report:~~quarterly report on Form 10-Q:


Number			Description		Location
	3.1
~~Number~~				~~Description~~
	*	~~2.1~~		Transaction Agreement, dated August 13, 2017, among Transocean Ltd., Transocean Inc. and Songa Offshore SE (incorporated by reference to Exhibit 2.1 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on August 15, 2017)
		~~2.2~~		Amendment No. 1 to Transaction Agreement, dated Stepember 15, 2017, among Transocean Ltd., Transocean Inc. and Songa Offshore SE (incorporated by reference to Exhibit 2.1 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on September 15, 2017)
		~~3.1~~		Articles of Association of Transocean Ltd. ~~(incorporated by reference to~~		Exhibit 3.1 to Transocean Ltd.’s ~~annual report~~Current Report on Form ~~10‑K~~8-K (Commission File No. ~~000‑53533)~~001-38373) filed on April 10, 2023
	3.2		Organizational Regulations of Transocean Ltd., adopted April 7, 2021		Exhibit 3.1 to Transocean Ltd.’s Current Report on Form 8-K (Commission File No. 001-38373) filed on April 7, 2021
	4.1		Indenture, dated as of January 17, 2023, among Transocean Titan Financing Limited, the Guarantors and Truist Bank, as trustee and collateral agent		Exhibit 4.1 to Transocean Ltd.’s Current Report on Form 8-K (Commission File No. 001-38373) filed on January 17, 2023
	4.2		Indenture, dated as of January 31, 2023, among Transocean Inc., the Guarantors named therein and Truist Bank, as trustee and collateral agent		Exhibit 4.1 to Transocean Ltd.’s Current Report on Form 8-K (Commission File No. 001-38373) filed on January 31, 2023
	10.1		Terms and Conditions of 2023 Executive Equity Awards		Exhibit 10.50 to Transocean Ltd.’s Annual Report on Form 10-K (Commission File No. 001-38373) for the year ended December 31, ~~2016)~~2022 filed on February 23, 2023
	31.1	~~3.2~~		~~Organizational Regulations~~Certification of ~~Transocean Ltd. (incorporated by reference~~Chief Executive Officer pursuant to ~~Exhibit 3.1 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on November 23, 2016)~~
		~~4.1~~		~~Indenture dated as~~Rule 13a-14(a) of ~~October 17, 2017, by~~the Securities Exchange Act of 1934 and among Transocean Inc., the guarantors party thereto and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on October 17, 2017)
		~~10.1~~		Pre‑acceptance, dated August 13, 2017, between Transocean Ltd. and Perestroika AS (incorporated by reference to Exhibit 10.1 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on August 15, 2017)
		~~10.2~~		Pre‑acceptance, dated August 13, 2017, between Transocean Ltd. an d certain funds affiliated with Asia Research and Capital Management Ltd. (incorporated by reference to Exhibit 10.2 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on August 15, 2017)
		~~10.3~~		Form of Pre‑acceptance among Transocean Ltd. and certain shareholders of Songa Offshore SE (incorporated by reference to Exhibit 10.3 to Transocean Ltd.’s current report on Form 8‑K (Commission File NO. 000‑53533) filed on August 15, 2017)
		~~10.4~~		Form of Amendment No. 1 to Pre‑acceptance among Transocean Ltd. and certain shareholders of Songa Offshore SE (incorporated by reference to Exhibit 10.1 to Transocean Ltd.’s current report on Form 8‑K (Commission File No. 000‑53533) filed on September 15, 2017)

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~~Number~~			~~Description~~
†		~~31.1~~	~~CEO Certification Pursuant to~~ Section 302 of the ~~Sarbanes‑Oxley~~Sarbanes-Oxley Act of 2002	Filed herewith
†	31.2	~~31.2~~	~~CFO~~ Certification ~~Pursuant~~of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and Section 302 of the ~~Sarbanes‑Oxley~~Sarbanes-Oxley Act of 2002	Filed herewith
†	32.1	~~32.1~~	~~CEO~~ Certification ~~Pursuant~~of Chief Executive Officer pursuant to Section 906 of the ~~Sarbanes‑Oxley~~Sarbanes-Oxley Act of 2002	Furnished herewith
†	32.2	~~32.2~~	~~CFO~~ Certification ~~Pursuant~~of Chief Financial Officer pursuant to Section 906 of the ~~Sarbanes‑Oxley~~Sarbanes-Oxley Act of 2002	Furnished herewith
†	101	~~101~~	Interactive data files

† pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language: (i) our condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022; (ii) our condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022; (iii) our condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2023 and 2022, (iv) our condensed consolidated statements of equity for the three months ended March 31, 2023 and 2022; (v) our condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022; and (vi) the notes to condensed consolidated financial statements				Filed ~~herewith.~~herewith
	*104		The cover page from our quarterly report on Form 10-Q for the quarterly period ended March 31, 2023, formatted in Inline Extensible Business Reporting Language	Certain of the appendices to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S‑K. We agree to furnish a copy of any schedule omitted from this exhibit to the SEC upon request.	Filed herewith

~~Certain agreements relating to our long‑term debt have not been filed as exhibits as permitted by paragraph (b)(4)(iii)(A)~~- 25 -

Table of Item 601 of Regulation S‑K since the total amount of securities authorized under any such agreements do not exceed 10 percent of our total consolidated assets. Upon request, we will furnish to the SEC all constituent agreements defining the rights of holders of our long‑term debt not filed herewith.Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized, on ~~November 1, 2017.~~May 2, 2023.

TRANSOCEAN LTD.



~~TRANSOCEAN LTD.~~



By:	~~/s/~~/s/ Mark L. Mey
	Mark L. Mey
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)



By:	~~/s/~~/s/ David Tonnel
	David Tonnel
	Senior Vice President and ~~Corporate Controller~~Chief Accounting Officer
	(Principal Accounting Officer)

- 3926 -


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations	1 1
	Condensed Consolidated Statements of Comprehensive ~~Income~~Loss	2 2
	Condensed Consolidated Balance Sheets	3 3
	Condensed Consolidated Statements of Equity	4 4
	Condensed Consolidated Statements of Cash Flows	5 5
	Notes to Condensed Consolidated Financial Statements	6 6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14 19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23 34
Item 4.	Controls and Procedures	23 34

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	24 36
Item 1A.	Risk Factors	24 36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24 38
Item 4.	~~Mine Safety Disclosures~~6.	38
~~Item 6.~~	Exhibits	25 38


	Three months ended				Nine months ended
	September 30,				September 30,
	2017		2016		2017		2016

Operating revenues
Contract drilling revenues	$	699	$	886	$	2,142	$	2,912
Other revenues		109		20		202		275
		808		906		2,344		3,187
Costs and expenses
Operating and maintenance		323		409		999		1,561
Depreciation		197		225		648		667
General and administrative		39		41		113		125
		559		675		1,760		2,353
Loss on impairment		(1,385)		(11)		(1,498)		(26)
Gain (loss) on disposal of assets, net		(9)		9		(1,602)		8
Operating income (loss)		(1,145)		229		(2,516)		816

Other income (expense), net
Interest income		21		5		34		15
Interest expense, net of amounts capitalized		(112)		(109)		(368)		(296)
Gain (loss) on retirement of debt		(1)		110		(49)		148
Other, net		6		7		7		9
		(86)		13		(376)		(124)
Income (loss) before income tax expense		(1,231)		242		(2,892)		692
Income tax expense		180		6		103		122

Net income (loss)		(1,411)		236		(2,995)		570
Net income attributable to noncontrolling interest		6		18		21		35
Net income (loss) attributable to controlling interest	$	(1,417)	$	218	$	(3,016)	$	535

Earnings (loss) per share
Earnings (loss) per share—basic	$	(3.62)	$	0.59	$	(7.72)	$	1.44
Earnings (loss) per share—diluted	$	(3.62)	$	0.59	$	(7.72)	$	1.44

Weighted-average shares outstanding
Basic		391		365		391		365
Diluted		391		365		391		365


	September 30,		December 31,
	2017		2016

Assets
Cash and cash equivalents	$	2,717	$	3,052
Accounts receivable, net of allowance for doubtful accounts of less than $1 at September 30, 2017 and December 31, 2016		663		898
Materials and supplies, net of allowance for obsolescence of $154 and $153 at September 30, 2017 and December 31, 2016, respectively		437		561
Restricted cash		480		466
Other current assets		154		121
Total current assets		4,451		5,098

Property and equipment		22,599		27,372
Less accumulated depreciation		(5,117)		(6,279)
Property and equipment, net		17,482		21,093
Deferred income taxes, net		167		298
Other assets		341		400
Total assets	$	22,441	$	26,889

Liabilities and equity
Accounts payable	$	172	$	206
Accrued income taxes		159		95
Debt due within one year		799		724
Other current liabilities		755		960
Total current liabilities		1,885		1,985

Long-term debt		6,501		7,740
Deferred income taxes, net		106		178
Other long-term liabilities		1,098		1,153
Total long-term liabilities		7,705		9,071

Commitments and contingencies
Redeemable noncontrolling interest		48		28

Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at September 30, 2017 and December 31, 2016 and 391,211,739 and 389,366,241 outstanding at September 30, 2017 and December 31, 2016, respectively		37		36
Additional paid-in capital		11,020		10,993
Retained earnings		2,040		5,056
Accumulated other comprehensive loss		(298)		(283)
Total controlling interest shareholders’ equity		12,799		15,802
Noncontrolling interest		4		3
Total equity		12,803		15,805
Total liabilities and equity	$	22,441	$	26,889


	Three months ended September 30,								Nine months ended September 30,
	2017				2016				2017				2016
	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
Numerator for earnings (loss) per share
Income (loss) from continuing operations attributable to controlling interest	$	(1,417)	$	(1,417)	$	218	$	218	$	(3,016)	$	(3,016)	$	535	$	535
Undistributed earnings allocable to participating securities		—		—		(3)		(3)		—		—		(8)		(9)
Income (loss) from continuing operations available to shareholders	$	(1,417)	$	(1,417)	$	215	$	215	$	(3,016)	$	(3,016)	$	527	$	526

Denominator for earnings (loss) per share
Weighted-average shares outstanding		391		391		365		365		391		391		365		365
Effect of stock options and other share-based awards		—		—		—		—		—		—		—		—
Weighted-average shares for per share calculation		391		391		365		365		391		391		365		365

Per share earnings (loss) from continuing operations	$	(3.62)	$	(3.62)	$	0.59	$	0.59	$	(7.72)	$	(7.72)	$	1.44	$	1.44


	Principal amount				Carrying amount
	September 30,		December 31,		September 30,		December 31,
	2017		2016		2017		2016
2.50% Senior Notes due October 2017	$	152	$	485	$	152	$	484
Eksportfinans Loans due January 2018		27		123		27		123
6.00% Senior Notes due March 2018		319		754		319		757
7.375% Senior Notes due April 2018		82		211		82		211
6.50% Senior Notes due November 2020		292		508		295		513
6.375% Senior Notes due December 2021		332		552		330		549
5.52% Senior Secured Notes due May 2022		381		—		375		—
3.80% Senior Notes due October 2022		506		539		501		534
9.00% Senior Notes due July 2023		1,250		1,250		1,215		1,211
7.75% Senior Secured Notes due October 2024		570		600		556		583
6.25% Senior Secured Notes due December 2024		594		625		580		609
7.45% Notes due April 2027		88		88		86		86
8.00% Debentures due April 2027		57		57		57		57
7.00% Notes due June 2028		300		300		307		308
Capital lease contract due August 2029		545		566		545		566
7.50% Notes due April 2031		588		588		585		585
6.80% Senior Notes due March 2038		1,000		1,000		991		991
7.35% Senior Notes due December 2041		300		300		297		297
Total debt		7,383		8,546		7,300		8,464
Less debt due within one year
2.50% Senior Notes due October 2017		152		485		152		484
Eksportfinans Loans due January 2018		27		98		27		98
6.00% Senior Notes due March 2018		319		—		319		—
7.375% Senior Notes due April 2018		82		—		82		—
5.52% Senior Secured Notes due May 2022		77		—		75		—
7.75% Senior Secured Notes due October 2024		60		60		57		57
6.25% Senior Secured Notes due December 2024		63		63		60		60
Capital lease contract due August 2029		27		25		27		25
Total debt due within one year		807		731		799		724
Total long-term debt	$	6,576	$	7,815	$	6,501	$	7,740


	Three months ended September 30, 2017								Three months ended September 30, 2016
	U.S.		Non-U.S.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total		Plans		Plans		Plans		Total
Net periodic benefit costs
Service cost	$	1	$	1	$	—	$	2	$	—	$	3	$	—	$	3
Interest cost		15		3		1		19		18		4		(1)		21
Expected return on plan assets		(19)		(4)		—		(23)		(20)		(6)		—		(26)
Settlements and curtailments		—		1		—		1		—		(5)		2		(3)
Actuarial loss, net		1		1		—		2		1		—		—		1
Prior service cost, net		—		—		(1)		(1)		—		—		(2)		(2)
Net periodic benefit costs	$	(2)	$	2	$	—	$	—	$	(1)	$	(4)	$	(1)	$	(6)

Funding contributions	$	—	$	—	$	1	$	1	$	1	$	1	$	—	$	2


	Nine months ended September 30, 2017								Nine months ended September 30, 2016
	U.S.		Non-U.S.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plans		Plans		Total		Plans		Plans		Plans		Total
Net periodic benefit costs
Service cost	$	3	$	2	$	—	$	5	$	2	$	11	$	—	$	13
Interest cost		48		8		1		57		52		12		—		64
Expected return on plan assets		(56)		(14)		—		(70)		(60)		(18)		—		(78)
Settlements and curtailments		—		6		—		6		1		(6)		—		(5)
Actuarial loss, net		4		1		—		5		3		2		—		5
Prior service cost, net		—		—		(2)		(2)		—		—		(4)		(4)
Net periodic benefit costs	$	(1)	$	3	$	(1)	$	1	$	(2)	$	1	$	(4)	$	(5)

Funding contributions	$	1	$	7	$	2	$	10	$	3	$	41	$	1	$	45


	September 30, 2017				December 31, 2016
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Cash and cash equivalents	$	2,717	$	2,717	$	3,052	$	3,052
Restricted cash accounts and investments		503		503		510		511
Long-term debt, including current maturities		7,300		7,415		8,464		8,218


	October 26,		July 25,		February 9,
	2017		2017		2017
Contract backlog	(In millions)
Ultra-deepwater floaters	$	8,664	$	9,234	$	10,070
Harsh environment floaters		450		540		623
Deepwater floaters		155		190		259
Midwater floaters		83		100		127
High-specification jackups		71		96		172
Total contract backlog	$	9,423	$	10,160	$	11,251


	Three months ended
	September 30,		June 30,		September 30,
	2017		2017		2016
Average daily revenue
Ultra-deepwater floaters	$	449,300	$	482,200	$	487,800
Harsh environment floaters	$	213,100	$	262,200	$	225,900
Deepwater floaters	$	187,300	$	199,000	$	234,100
Midwater floaters	$	98,900	$	100,300	$	240,400
High-specification jackups	$	151,200	$	142,800	$	143,100
Total fleet average daily revenue	$	319,000	$	329,900	$	332,100


			Total costs		Expected
			for the		costs for the
	Total costs		nine months		three months								Total
	through		ended		ending								estimated
	December 31,		September 30,		December 31,		For the years ending December 31,						costs
	2016		2017		2017		2018		2019		2020		at completion
	(In millions)
Deepwater Pontus (a)	$	745	$	134	$	21	$	—	$	—	$	—	$	900
Deepwater Poseidon (b)		707		99		77		27		—		—		910
Ultra-Deepwater drillship TBN1 (c)		221		31		13		27		56		472		820
Ultra-Deepwater drillship TBN2 (c)		166		30		4		19		38		513		770
Total	$	1,839	$	294	$	115	$	73	$	94	$	985	$	3,400


				Total	Maximum Number
				Number of Shares	(or Approximate Dollar Value)
	Total Number	Average		Purchased as Part	of Shares that May Yet Be Purchased
	of Shares	Price Paid		of Publicly Announced	Under the Plans or Programs
Period	Purchased (a)	Per Share		Plans or Programs (b)	(in millions) (b)
July 2017	30	$	8.33	—	$	3,349
August 2017	—		—	—		3,349
September 2017	—		—	—		3,349
Total	30	$	8.33	—	$	3,349