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Transocean Ltd. Reports Fourth Quarter and Full Year 2021 Results

February 22, 2022
  • Total contract drilling revenues were $621 million, compared to $626 million in the third quarter of 2021 (total adjusted contract drilling revenues of $671 million, compared to $683 million in the third quarter of 2021);
  • Revenue efficiency(1) was 94.5%, compared to 98.1% in the prior quarter;
  • Operating and maintenance expense was $430 million, compared to $398 million in the prior quarter;
  • Net loss attributable to controlling interest was $260 million, $0.40 per diluted share, compared to $130 million, $0.20 per diluted share, in the third quarter of 2021;
  • Adjusted EBITDA was $250 million, compared to $245 million in the prior quarter; and
  • Contract backlog was $6.5 billion as of the February 2022 Fleet Status Report.

STEINHAUSEN, Switzerland, Feb. 22, 2022 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE: RIG) today reported a net loss attributable to controlling interest of $260 million, $0.40 per diluted share, for the three months ended December 31, 2021.

Fourth quarter 2021 results included net unfavorable non-cash items of $134 million, or $0.21 per diluted share, as follows:

  • $72 million, $0.11 per diluted share, related to discrete tax items;
  • $37 million, $0.06 per diluted share, loss on impairment of investment in unconsolidated affiliate; and
  • $28 million, $0.04 per diluted share, allowance for excess materials and supplies, certain items.

These unfavorable non-cash items were partially offset by:

  • $3 million, gain on disposal of assets.

After consideration of this net unfavorable item, fourth quarter 2021 adjusted net loss was $126 million, $0.19 per diluted share, compared to $122 million, $0.19 per diluted share, in the third quarter of 2021.

Contract drilling revenues for the three months ended December 31, 2021 decreased sequentially by $5 million to $621 million, primarily due to lower revenue efficiency and a rig that was idle in the fourth quarter, partially offset by one rig that returned to work following a planned shipyard stay and one rig that returned to work after being idle in the prior quarter.

A non-cash revenue reduction of $50 million was recognized in the fourth quarter as a result of contract intangible amortization associated with the Songa and Ocean Rig acquisitions in 2018. The reduction, compared to $57 million in the prior period, is the result of the completion of the contract acquired in the Ocean Rig acquisition.

Operating and maintenance expense was $430 million, compared with $398 million in the prior quarter. The sequential increase was primarily the result of a $28 million increase in our allowance for excess materials and supplies, increased personnel costs and higher in-service maintenance costs across our fleet, partially offset by a settlement with insurance carriers, reduced activity and lower shipyard costs.

General and administrative expense was $49 million, up from $40 million in the third quarter of 2021. The increase was primarily due to research and development costs incurred in the fourth quarter 2021 with no comparable activity in prior quarter and increased legal and professional fees.

Interest expense, net of amounts capitalized, was $107 million, compared with $110 million in the prior quarter. Interest income was $4 million, which is in line with the third quarter of 2021.

The Effective Tax Rate(2) was (74.0)%, down from (26.1)% in the prior quarter. The decrease was primarily due to the discrete tax impact of the transition to ordinary taxation in Switzerland. The Effective Tax Rate excluding discrete items was (44.9)% compared to (18.1)% in previous quarter.

Cash flows provided by operating activities were $185 million, compared to $141 million in the prior quarter. The fourth quarter increase was primarily due to the timing of interest payments and decreased income tax payments, partially offset by increased payroll-related payments.

Fourth quarter 2021 capital expenditures of $71 million, compared to $37 million in the prior quarter, were primarily related to the company’s newbuild drillships under construction.

“Our steadfast focus on safety, reliability and efficiency enabled us to once again deliver strong operational results for our customers in 2021, which ultimately translated into industry leading financial results,” said Chief Executive Officer, Jeremy Thigpen. “Despite the continuing challenges that COVID-19 presented to us all, for the full year, we delivered exceptional uptime performance resulting in revenue efficiency of 97.0% and Adjusted EBITDA of $995 million. I recognize and thank the entire Transocean team for its dedication and commitment throughout 2021.”

Thigpen added: “As we move into 2022, we are more optimistic than we have been in the past seven years. Energy demand remains resilient driving oil prices to seven-year highs. As a result, we are experiencing a growing list of opportunities from customers across the globe who value our high-specification floating fleet and our strong and consistent operating performance. With customer demand growing, and utilization for active high-specification assets pushing higher, we expect the upward trend in dayrates to continue as we progress through the year.”

Full Year 2021

For the year ended December 31, 2021, net loss attributable to controlling interest totaled $592 million, or $0.93 per diluted share. Full year results included $118 million, or $0.19 per diluted share, net unfavorable non-cash items listed as follows:

  • $57 million, $0.09 per diluted share, loss on disposal of assets;
  • $47 million, $0.08 per diluted share, related to discrete tax items;
  • $37 million, $0.06 per diluted share, loss on impairment of investments in unconsolidated affiliate; and
  • $28 million, $0.04 per diluted share, allowance for excess materials and supplies, certain items.

These unfavorable non-cash items were partially offset by:

  • $51 million, $0.08 per diluted share, gain on retirement of debt.

After consideration of these net unfavorable items, adjusted net loss for 2021 was $474 million, $0.74 per diluted share.

Non-GAAP Financial Measures

We present our operating results in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). We believe certain financial measures, such as Adjusted Contract Drilling Revenues, EBITDA, Adjusted EBITDA and Adjusted Net Income, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under U.S. GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. Such non-GAAP measures should be considered as a supplement to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP.

All non-GAAP measure reconciliations to the most comparative U.S. GAAP measures are displayed in quantitative schedules on the company’s website at: www.deepwater.com.

About Transocean

Transocean is a leading international provider of offshore contract drilling services for oil and gas wells. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on ultra-deepwater and harsh environment drilling services and believes that it operates one of the most versatile offshore drilling fleets in the world.

Transocean owns or has partial ownership interests in and operates a fleet of 37 mobile offshore drilling units consisting of 27 ultra-deepwater floaters and 10 harsh environment floaters. In addition, Transocean is constructing two ultra-deepwater drillships.

For more information about Transocean, please visit: www.deepwater.com.

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EST, 3 p.m. CET, on Wednesday, February 23, 2022, to discuss the results. To participate, dial +1 313-209-7315 and refer to conference code 7608355 approximately 15 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode at: www.deepwater.com, by selecting Investors, News, and Webcasts. Supplemental materials that may be referenced during the teleconference will be available at: www.deepwater.com, by selecting Investors, Financial Reports.

A replay of the conference call will be available after 12 p.m. EST, 6 p.m. CET, on Wednesday, February 23, 2022. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 7608355, pin 7774. The replay will also be available on the company’s website.

Forward-Looking Statements

The statements described herein that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements could contain words such as \"possible,\" \"intend,\" \"will,\" \"if,\" \"expect,\" or other similar expressions. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, estimated duration of customer contracts, contract dayrate amounts, future contract commencement dates and locations, planned shipyard projects and other out-of-service time, sales of drilling units, timing of the company’s newbuild deliveries, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, the fluctuation of current and future prices of oil and gas, the global and regional supply and demand for oil and gas, the intention to scrap certain drilling rigs, the success of our business following prior acquisitions, the effects of the spread of and mitigation efforts by governments, businesses and individuals related to contagious illnesses, such as COVID-19, and other factors, including those and other risks discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2020, and in the company's other filings with the SEC, which are available free of charge on the SEC's website at: www.sec.gov. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law. All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company’s website at: www.deepwater.com.

This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do not constitute an offering prospectus within the meaning of the Swiss Financial Services Act (“FinSA”) or advertising within the meaning of the FinSA. Investors must rely on their own evaluation of Transocean and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean.

Notes

(1) Revenue efficiency is defined as actual contract drilling revenues, excluding revenues for contract 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 revenues for incentive provisions, reimbursements and contract terminations. See the accompanying schedule entitled “Revenue Efficiency.”

(2) Effective Tax Rate is defined as income tax expense divided by income before income taxes. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

Analyst Contact:
Alison Johnson
+1 713-232-7214

Media Contact:
Pam Easton
+1 713-232-7647


TRANSOCEAN LTD. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
 (In millions, except per share data)            
 (Unaudited)          
    Years ended December 31  
      2021        2020        2019     
                     
Contract drilling revenues   $ 2,556     $ 3,152     $ 3,088    
                     
Costs and expenses                    
Operating and maintenance     1,697       2,000       2,140    
Depreciation and amortization     742       781       855    
General and administrative     167       183       193    
      2,606       2,964       3,188    
Loss on impairment           (597 )     (609 )  
Loss on disposal of assets, net     (62 )     (84 )     (12 )  
Operating loss     (112 )     (493 )     (721 )  
                     
Other income (expense), net                    
Interest income     15       21       43    
Interest expense, net of amounts capitalized     (447 )     (575 )     (660 )  
Gain (loss) on restructuring and retirement of debt     51       533       (41 )  
Other, net     23       (27 )     181    
      (358 )     (48 )     (477 )  
Loss before income tax expense     (470 )     (541 )     (1,198 )  
Income tax expense     121       27       59    
                     
Net loss     (591 )     (568 )     (1,257 )  
Net income (loss) attributable to noncontrolling interest     1       (1 )     (2 )  
Net loss attributable to controlling interest   $ (592 )   $ (567 )   $ (1,255 )  
                     
Loss per share, basic and diluted   $ (0.93 )   $ (0.92 )   $ (2.05 )  
Weighted-average shares, basic and diluted     637       615       612    


TRANSOCEAN LTD. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In millions, except share data)  
(Unaudited)
    December 31  
    2021        2020     
               
Assets              
Cash and cash equivalents   $ 976     $ 1,154    
Accounts receivable, net     492       583    
Materials and supplies, net     392       434    
Restricted cash and cash equivalents     436       406    
Other current assets     148       163    
Total current assets     2,444       2,740    
               
Property and equipment     23,152       23,040    
Less accumulated depreciation     (6,054 )     (5,373 )  
Property and equipment, net     17,098       17,667    
Contract intangible assets     173       393    
Deferred tax assets, net     7       9    
Other assets     959       995    
Total assets   $ 20,681     $ 21,804    
               
Liabilities and equity              
Accounts payable   $ 228     $ 194    
Accrued income taxes     17       28    
Debt due within one year     513       505    
Other current liabilities     545       659    
Total current liabilities     1,303       1,386    
               
Long-term debt     6,657       7,302    
Deferred tax liabilities, net     447       315    
Other long-term liabilities     1,068       1,366    
Total long-term liabilities     8,172       8,983    
               
Commitments and contingencies              
               
Shares, CHF 0.10 par value, 891,379,306 authorized, 142,363,356 conditionally authorized, 728,176,456 issued and 655,505,335 outstanding at December 31, 2021, and 824,650,660 authorized, 142,363,647 conditionally authorized, 639,676,165 issued and 615,140,276 outstanding at December 31, 2020     64       60    
Additional paid-in capital     13,683       13,501    
Accumulated deficit     (2,458 )     (1,866 )  
Accumulated other comprehensive loss     (84 )     (263 )  
Total controlling interest shareholders’ equity     11,205       11,432    
Noncontrolling interest     1       3    
Total equity     11,206       11,435    
Total liabilities and equity   $ 20,681     $ 21,804    


TRANSOCEAN LTD. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In millions)  
(Unaudited)
    Years ended December 31  
    2021        2020        2019     
Cash flows from operating activities                    
Net loss   $ (591 )   $ (568 )   $ (1,257 )  
Adjustments to reconcile to net cash provided by operating activities:                    
Contract intangible asset amortization     220       215       187    
Depreciation and amortization     742       781       855    
Share-based compensation expense     28       31       37    
Loss on impairment           597       609    
Loss on impairment of investment in unconsolidated affiliates     37       62          
Loss on disposal of assets, net     62       84       12    
(Gain) loss on restructuring and retirement of debt     (51 )     (533 )     41    
Gain on termination of construction contracts                 (132 )  
Deferred income tax expense     128       60       248    
Other, net     77       83       41    
Changes in deferred revenues, net     (108 )     (73 )     43    
Changes in deferred costs, net     (6 )     12       (33 )  
Changes in other operating assets and liabilities, net     37       (353 )     (311 )  
Net cash provided by operating activities     575       398       340    
                     
Cash flows from investing activities                    
Capital expenditures     (208 )     (265 )     (387 )  
Investment in loans to unconsolidated affiliate     (33 )     (2 )        
Investments in unconsolidated affiliates     (1 )     (19 )     (77 )  
Proceeds from disposal of assets, net     9       24       70    
Proceeds from maturities of unrestricted and restricted investments           5       123    
Other, net                 3    
Net cash used in investing activities     (233 )     (257 )     (268 )  
                     
Cash flows from financing activities                    
Repayments of debt     (606 )     (1,637 )     (1,325 )  
Proceeds from issuance of shares, net of issue costs     158                
Proceeds from issuance of debt, net of discounts and issue costs           743       1,056    
Other, net     (42 )     (36 )     (43 )  
Net cash used in financing activities     (490 )     (930 )     (312 )  
                     
Net decrease in unrestricted and restricted cash and cash equivalents     (148 )     (789 )     (240 )  
Unrestricted and restricted cash and cash equivalents, beginning of period     1,560       2,349       2,589    
Unrestricted and restricted cash and cash equivalents, end of period   $ 1,412     $ 1,560     $ 2,349    


                                   
TRANSOCEAN LTD. AND SUBSIDIARIES  
FLEET OPERATING STATISTICS  
                                   
                                   
    Three months ended     Years ended  
    December 31   September 30,   December 31     December 31   December 31  
Contract Drilling Revenues (in millions)      2021    2021    2020      2021    2020   
Contract drilling revenues                                  
Ultra-deepwater floaters   $ 432   $ 428   $ 440     $ 1,720   $ 2,094  
Harsh environment floaters     189     198     250       836     1,046  
Midwater floaters                       12  
Total contract drilling revenues   $ 621   $ 626   $ 690     $ 2,556   $ 3,152  


                                   
    Three months ended     Years ended  
    December 31   September 30,   December 31     December 31   December 31  
Average Daily Revenue (1)      2021    2021    2020      2021    2020   
Ultra-deepwater floaters   $ 337,100   $ 351,900   $ 342,100     $ 355,500   $ 324,500  
Harsh environment floaters     387,700     401,600     357,500       386,200     339,600  
Midwater floaters                       111,400  
Total fleet average daily revenue   $ 352,500     367,100   $ 347,500     $ 365,600   $ 327,500  


                                 
    Three months ended     Years ended
     December 31    September 30,    December 31      December 31    December 31
Utilization (2)   2021   2021   2020     2021   2020
Ultra-deepwater floaters   50.9 %   50.2 %   52.1 %     49.3 %   58.5 %
Harsh environment floaters   60.0 %   59.8 %   73.8 %     64.4 %   72.6 %
Midwater floaters   %   %   %     %   37.1 %
Total fleet average rig utilization   53.4 %   52.8 %   58.4 %     53.4 %   62.4 %


                                 
                                 
    Three months ended     Years ended
    December 31   September 30,   December 31     December 31   December 31
Revenue Efficiency (3)    2021    2021    2020      2021    2020
Ultra-deepwater floaters   93.4 %   96.0 %   96.7 %     96.1 %   97.2 %
Harsh environment floaters   96.7 %   102.5 %   97.9 %     98.8 %   95.0 %
Midwater floaters   %   %   %     %   86.2 %
Total fleet average revenue efficiency   94.5 %   98.1 %   97.2 %     97.0 %   96.3 %
                                 
                                 
(1) Average daily revenue is defined as contract drilling revenues, excluding revenues for contract terminations, reimbursements and contract intangible amortization, earned per operating day. An operating day is defined as a calendar day during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations.
                                 
(2) 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.
                                 
(3) Revenue efficiency is defined as actual contract drilling revenues, excluding revenues for contract 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 revenues for incentive provisions, reimbursements and contract terminations.

                                                                                                                                                                                                                        

                                             
TRANSOCEAN LTD. AND SUBSIDIARIES  
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS  
ADJUSTED NET INCOME (LOSS) AND ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE  
(In millions, except per share data)  
                                             
                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
     12/31/21   12/31/21   09/30/21   09/30/21   06/30/21   06/30/21    03/31/21  
Adjusted Net Loss                                            
Net loss attributable to controlling interest, as reported   $ (592 )   $ (260 )   $ (332 )   $ (130 )   $ (202 )   $ (103 )   $ (99 )  
Allowance for excess materials and supplies, certain items     28       28                                  
(Gain) loss on disposal of assets, net     57       (3 )     60             60             60    
Loss on impairment of investment in unconsolidated affiliate     37       37                                  
Gain on retirement of debt     (51 )           (51 )           (51 )           (51 )  
Discrete tax items     47       72       (25 )     8       (33 )     (6 )     (27 )  
Net loss, as adjusted   $ (474 )   $ (126 )   $ (348 )   $ (122 )   $ (226 )   $ (109 )   $ (117 )  
                                             
Adjusted Diluted Loss Per Share:                                            
Diluted loss per share, as reported   $ (0.93 )   $ (0.40 )   $ (0.53 )   $ (0.20 )   $ (0.33 )   $ (0.17 )   $ (0.16 )  
Allowance for excess materials and supplies, certain items     0.04       0.04                                  
(Gain) loss on disposal of assets, net     0.09             0.10             0.10             0.10    
Loss on impairment of investment in unconsolidated affiliate     0.06       0.06                                  
Gain on retirement of debt     (0.08 )           (0.08 )           (0.08 )           (0.08 )  
Discrete tax items     0.08       0.11       (0.04 )     0.01       (0.06 )     (0.01 )     (0.05 )  
Diluted loss per share, as adjusted   $ (0.74 )   $ (0.19 )   $ (0.55 )   $ (0.19 )   $ (0.37 )   $ (0.18 )   $ (0.19 )  


                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
       12/31/20     12/31/20    09/30/20     09/30/20    06/30/20    06/30/20    03/31/20  
Adjusted Net Loss                                            
Net income (loss) attributable to controlling interest, as reported   $ (567 )   $ (37 )   $ (530 )   $ 359     $ (889 )   $ (497 )   $ (392 )  
Restructuring costs     5       (1 )     6       5       1       1          
Loss on impairment of assets     597             597             597       430       167    
Loss on disposal of assets, net     61             61       61                      
Loss on impairment of investment in unconsolidated affiliates     62       3       59             59       59          
(Gain) loss on restructuring and retirement of debt     (533 )     (137 )     (396 )     (449 )     53       (4 )     57    
Discrete tax items     (91 )     (37 )     (54 )     (45 )     (9 )     10       (19 )  
Net loss, as adjusted   $ (466 )   $ (209 )   $ (257 )   $ (69 )   $ (188 )   $ (1 )   $ (187 )  
                                             
Adjusted Diluted Loss Per Share:                                            
Diluted earnings (loss) per share, as reported   $ (0.92 )   $ (0.06 )   $ (0.86 )   $ 0.51     $ (1.45 )   $ (0.81 )   $ (0.64 )  
Restructuring costs     0.01             0.01       0.01                      
Loss on impairment of assets     0.97             0.97             0.97       0.70       0.28    
Loss on disposal of assets, net     0.10             0.10       0.09                      
Loss on impairment of investment in unconsolidated affiliates     0.10             0.10             0.10       0.10          
(Gain) loss on restructuring and retirement of debt     (0.87 )     (0.22 )     (0.65 )     (0.65 )     0.09       (0.01 )     0.09    
Discrete tax items     (0.15 )     (0.06 )     (0.09 )     (0.07 )     (0.02 )     0.02       (0.03 )  
Diluted loss per share, as adjusted   $ (0.76 )   $ (0.34 )   $ (0.42 )   $ (0.11 )   $ (0.31 )   $     $ (0.30 )  


                                             
TRANSOCEAN LTD. AND SUBSIDIARIES  
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS  
ADJUSTED CONTRACT DRILLING REVENUES  
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION AND RELATED MARGINS  
(In millions, except percentages)  
                                             
                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
     12/31/21   12/31/21   09/30/21   09/30/21   06/30/21   06/30/21   03/31/21  
                                             
Contract drilling revenues   $ 2,556     $ 621     $ 1,935     $ 626     $ 1,309     $ 656     $ 653    
Contract intangible asset amortization     220       50       170       57       113       57       56    
Adjusted Contract Drilling Revenues   $ 2,776     $ 671     $ 2,105     $ 683     $ 1,422     $ 713     $ 709    
                                             
Net loss   $ (591 )   $ (260 )   $ (331 )   $ (130 )   $ (201 )   $ (103 )   $ (98 )  
Interest expense, net of interest income     432       103       329       106       223       111       112    
Income tax expense (benefit)     121       111       10       27       (17 )     4       (21 )  
Depreciation and amortization     742       184       558       185       373       186       187    
Contract intangible asset amortization     220       50       170       57       113       57       56    
EBITDA     924       188       736       245       491       255       236    
                                             
Allowance for excess materials and supplies, certain items     28       28                                  
(Gain) loss on disposal of assets, net     57       (3 )     60             60             60    
Loss on impairment of investment in unconsolidated affiliate     37       37                                  
Gain on retirement of debt     (51 )           (51 )           (51 )           (51 )  
Adjusted EBITDA   $ 995     $ 250     $ 745     $ 245     $ 500     $ 255     $ 245    
                                             
                                             
EBITDA margin     33.3 %     28.0 %     35.0 %     35.9 %     34.5 %     35.8 %     33.3 %  
Adjusted EBITDA margin     35.8 %     37.3 %     35.4 %     35.9 %     35.2 %     35.8 %     34.6 %  


                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
    12/31/20   12/31/20   09/30/20   09/30/20   06/30/20   06/30/20   03/31/20  
                                             
Contract drilling revenues   $ 3,152     $ 690     $ 2,462     $ 773     $ 1,689     $ 930     $ 759    
Contract intangible asset amortization     215       57       158       57       101       53       48    
Adjusted Contract Drilling Revenues   $ 3,367     $ 747     $ 2,620     $ 830     $ 1,790     $ 983     $ 807    
                                             
Net income (loss)   $ (568 )   $ (39 )   $ (529 )   $ 359     $ (888 )   $ (497 )   $ (391 )  
Interest expense, net of interest income     554       115       439       139       300       149       151    
Income tax expense (benefit)     27       23       4       (24 )     28       32       (4 )  
Depreciation and amortization     781       189       592       190       402       196       206    
Contract intangible asset amortization     215       57       158       57       101       53       48    
EBITDA     1,009       345       664       721       (57 )     (67 )     10    
                                             
Restructuring costs     5       (1 )     6       5       1       1          
Loss on impairment of assets     597             597             597       429       168    
Loss on disposal of assets, net     61             61       61                      
Loss on impairment of investment in unconsolidated affiliates     62       3       59             59       59          
(Gain) loss on restructuring and retirement of debt     (533 )     (137 )     (396 )     (449 )     53       (4 )     57    
Adjusted EBITDA   $ 1,201     $ 210     $ 991     $ 338     $ 653     $ 418     $ 235    
                                             
                                             
EBITDA margin     30.0 %     46.2 %     25.3 %     86.9 %     (3.2 )%     (6.8 )%     1.2 %  
Adjusted EBITDA margin     35.7 %     28.1 %     37.8 %     40.7 %     36.5 %     42.5 %     29.1 %  
                                             


TRANSOCEAN LTD. AND SUBSIDIARIES  
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS  
(In millions, except tax rates)  
                                 
                                 
    Three months ended   Years ended  
    December 31      September 30,      December 31   December 31   December 31  
    2021        2021        2020        2021        2020    
                                 
Loss before income taxes   $ (149 )   $ (103 )   $ (16 )   $ (470 )   $ (541 )  
Restructuring costs                 (1 )           5    
Allowance for excess materials and supplies, certain items     28                   28          
Loss on impairment of assets                             597    
(Gain) loss on disposal of assets, net     (3 )                 57       61    
Loss on impairment of investment in unconsolidated affiliates     37             3       37       62    
Gain on restructuring and retirement of debt                 (137 )     (51 )     (533 )  
Adjusted loss before income taxes   $ (87 )   $ (103 )     (151 )   $ (399 )     (349 )  
                                 
Revenues recognized for the settlement of disputes                             (157 )  
Adjusted loss before income taxes for determining effective tax rate                           $ (506 )  
                                 
                                 
Income tax expense   $ 111     $ 27     $ 23     $ 121     $ 27    
Restructuring costs                                
Allowance for excess materials and supplies, certain items                                
Loss on impairment of assets                                
(Gain) loss on disposal of assets, net                                
Loss on impairment of investment in unconsolidated affiliates                                
Gain on restructuring and retirement of debt                                
Revenues recognized for the settlement of disputes                 (4 )           (4 )  
Changes in estimates (1)     (72 )     (8 )     41       (47 )     95    
Adjusted income tax expense (2)   $ 39     $ 19     $ 60     $ 74     $ 118    
                                 
Effective Tax Rate (3)     (74.0 )%     (26.1 )%     (147.9 )%     (25.7 )%     (5.1 )%  
                                 
Effective Tax Rate, excluding discrete items (4)     (44.9 )%     (18.1 )%     (39.9 )%     (18.5 )%     (23.4 )%  
                                 
                                 
(1) Our estimates change as we file tax returns, settle disputes with tax authorities, or become aware of changes in laws and other events that have an effect on our (a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities.  
                                 
(2) The three months ended December 31, 2021 included $23 million of additional tax expense, reflecting the cumulative effect of an increase in the annual effective tax rate from the previous quarter estimate.  
                                 
(3) Our effective tax rate is calculated as income tax expense divided by income before income taxes.  
                                 
(4) Our effective tax rate, excluding discrete items, is calculated as income tax expense, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income before income tax expense, excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes related to estimating the annual effective tax rate.  

Transocean Ltd.