Transocean Q2 2025 Earnings

A Recovery Story in a Recovering Industry

Revenue: $988M v $906 Q1 2025 (+9%)

Net Income: ($938M) v ($79M) Q1 2025

Adj EBITDA: $344M v $244M Q1 2025 (+41%)

Backlog: $7.2B

Free Cash Flow: $104M

Commentary

Dare I say, Transocean reported a net positive report? The business generated $104M of free cash flows equal to a 10% FCF yield to revenues for the quarter and reduced the debt further, targeting $700M of total debt reduction for the full year.

Day rates for the fleet ended at $458.6K, up slightly from a year ago. Utilization rates clocked in at 67.3% and while that is not a stellar figure, we would note that a year ago that rate was 10% lower at just 57%.

Though the price of the stock doesn’t indicate it, Transocean is a near monopoly in the piece of it market it serves. Ultra deep water and harsh environment equipment is in tight supply and Transocean is one of the only businesses on the planet with the assets at scale to provide meaningful support for drilling services in those regions.

For those that do not follow Transocean closely, the business is continually ignored due to not running for Chapter 11 proceedings when the rest of the market did. Due to that fact, the business is heavily leveraged. However, debt is on the mind of the management team who we have a high regard for, and they are laser focused on reducing the leverage on the business. Debt has been reduced by $370M since December of 2024 and we believe this figure will meaningfully decrease in the coming years.

All told, I am very pleased with the momentum of Transocean’s business, the high-quality nature of its fleet that is demanding better utilization and higher day rates on average, and a strong management team to see it through a difficult period.

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