Executives from Transocean (NYSE:RIG) and Valaris used a joint conference call to outline the rationale for their newly announced combination, describing it as a “transformational” and “well-timed” all-stock deal aimed at strengthening offshore drilling capabilities, expanding geographic reach, and accelerating deleveraging.
Management frames deal around multi-year offshore upcycle
Transocean President and CEO Keelan Adamson said the companies share the view that offshore drilling is entering a “multi-year upcycle,” arguing that the combined organization will be better positioned as customers increase spending across offshore projects. Adamson highlighted expected customer benefits from a broader offering spanning high-specification drillships and semi-submersibles, plus a modern jackup fleet, along with expanded harsh-environment capabilities.
Fleet scope: drillships, semis, and a return to jackups
Executives repeatedly described the combination as complementary, with Adamson saying the goal is to build a driller able to address requirements “in all water depths across the world.” In prepared remarks, Adamson outlined the pro forma fleet composition, including:
- Harsh environment: seven semi-submersibles
- Deepwater: 24 seventh-generation drillships and two eighth-generation drillships
- Jackups: 31 rigs, including 11 designed for harsh environments
Several analysts focused on Transocean’s return to shallow-water exposure after the company previously exited the jackup market. Adamson responded that adding jackups at this stage of the cycle is expected to generate “more incremental cash” and help build a “high-quality asset base” that supports cash flow and deleveraging. In later questions, management reiterated it “fully intend[s] to continue operating the jackup fleet,” describing it as a strong cash flow contributor with favorable opportunities tied to rising upstream capital spending.
Synergies and cost-reduction plans
Adamson said the companies have identified more than $200 million of annual deal-related cost synergies, which he noted would be additive to Transocean’s existing cost reduction program. He said Transocean had already reduced its cost structure by about $100 million and is on track to deliver another $150 million in savings in 2026.
Management said that when capitalized, the $200 million-plus synergy estimate is expected to add more than $1.5 billion of value, which Adamson characterized as roughly 15% of the combined market capitalization.
Asked about the costs required to achieve the savings and the mix between operating and capital expenditures, executive Thad (identified only by first name on the call) said the companies do not anticipate significant costs beyond typical restructuring elements, adding that most savings are expected to come from operational efficiencies and redundancies. He said additional detail could be provided later as planning progresses.
Backlog, leverage targets, and capital return considerations
Adamson said the combined company would have a pro forma backlog of more than $10 billion, which he said provides clear cash flow visibility. He added that Transocean expects its leverage ratio to drop to about 1.5x within 24 months of closing, with improved liquidity and a lower cost of capital.
On assumptions behind the leverage target, Adamson said the companies have contract coverage across the combined fleet to support cash generation and suggested there are “no heroic assumptions on recontracting.”
Analysts also asked when Transocean might consider returning cash to shareholders. Adamson reiterated that deleveraging remains the top priority and said options would be evaluated once the company reaches “the right levels.” Thad added that while a current threshold exists under the existing structure, that could change with the scale of the combined fleet, and that the company would be positioned to discuss potential shareholder returns after closing—while emphasizing that deleveraging remains central given the cyclicality and capital intensity of the business.
Timing, premium, and regulatory outlook
Adamson said the implied premium in the transaction is about 10%–20% over a 60–90 day period. Management said the companies are focused on closing the transaction in the second half of 2026, and Adamson said the deal is expected to be accretive to free cash flow and earnings on a per-share basis after closing.
On regulatory approvals, Adamson said the companies had conducted a “comprehensive review” and expressed confidence that there are no regulatory issues presented by the transaction.
Valaris President and CEO Anton Dibowitz said Valaris’ board determined the transaction represents the best path to maximize shareholder value, and he highlighted cultural alignment between the firms around safety and customer service. Dibowitz said Valaris shareholders would benefit from their share of the synergies and participate in future upside potential of the combined company.
About Transocean (NYSE:RIG)
Transocean Ltd. is a leading international provider of offshore contract drilling services for the oil and gas industry. The company specializes in the operation of mobile drilling units, including ultra-deepwater drillships, semisubmersible rigs and high-specification jackup rigs. Transocean’s fleet is designed to meet complex drilling requirements, from ultra-deepwater well construction to shelf exploration and development projects.
The company’s core services encompass the full spectrum of offshore drilling operations, including project and engineering management, marine operations, drilling supervision, and maintenance support.
