Transocean Ltd. Price & Performance (RIG)

Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and uncertainties that could impact our future results. Also, please note that the company undertakes no duty to update or revise forward looking statements Following Jeremy, Keelan and Thad's prepared comments, we will conduct a question and answer session with our team. During this time, to give more participants an opportunity to speak, please limit yourself to one initial question and one follow-up.

Thank you, Allison, and welcome to our employees, customers, investors and analysts As disclosed in yesterday's earnings release, for the fourth quarter Transocean reported adjusted EBITDA of $323,000,000 on $952,000,000 of adjusted contract drilling revenues. Resulting in an adjusted EBITDA margin of approximately 34%. For the full year 2024, we delivered adjusted EBITDA of $1,150,000,000 on approximately $3,500,000,000 of adjusted contract drilling revenues, resulting in an adjusted EBITDA margin of approximately 33%. 2024 was a year that once again demonstrated the strong preference our customers have for Transocean's industry leading high specification fleet and services.

I do not believe that there has been a single moment in the previous decade that has better illustrated our industry leadership and the trust our customers place in Transocean Transocean clearly as in the past year. We outlined in great detail on the third quarter earnings call, throughout the year Transocean continued to book market leading rates even as excess capacity was obviously emerging among our competitors' suites. While our customers who are extremely astute observed an upcoming availability of they still awarded us with several contracts approaching and exceeding $500,000 per day for our high hook load seventh gen plus assets, and more than $600,000 per day for our eighth gen 20 ks assets. Clearly demonstrating their recognition of the value that Transocean creates in the delivery of their wells. In addition to many of our headline grabbing announcements, elsewhere in the fleet, in December, we announced that Reliance Industries exercised a four well option for the KG-one in India at a rate of $410,000 per day. The rig is now expected to remain in India on its firm program through the end of twenty twenty seven. And will generate strong cash flow throughout that period. Representing very good value for both us and our customer.

And in January, an eight day option was exercised on the Transocean endurance by its customer in Australia a rate of $390,000 per day.

Given that our active fleet is near full utilization through mid twenty twenty six, we are primarily focused on opportunities that commence in mid to late twenty twenty six, And I'm pleased to report that we are in direct discussions with a number of customer on our rigs with availability in 2026. [indiscernible] Before I cover those specific opportunities and our view of the market by region, I will hand it over to Keelan to review key operational milestones and technology deployments over the past year. Thanks, Jeremy, and good day, everyone. We achieved a number of significant operational milestones in 2024. Delivered our best ever occupational and process safety performance ending the year with a total recordable incident rate of 0.15.

And more importantly with zero serious injury cases or lost time injuries. The safety of all personnel aboard our rigs is our highest priority and we take great pride in our commitment to maintaining the highest standards and continuously striving for an incident free workplace, all the time, everywhere. In April, we commenced operations on the Transocean Equinox in Australia Transocean, The rig recently completed its contract several months ahead of the planned program schedule, creating significant value for our customer. The early completion has enabled the rig to progress to its higher day rate follow on program earlier than we expected. In June, we commenced operations on the 1,400 short ton drillship added to our fleet. Just nine months after we acquired the outstanding interest in that joint venture that owned the rig.

The Aquila is currently on contract with Petrobras until mid twenty twenty seven. Perhaps most notably from a technology perspective, during the year we installed the first two twenty ks subsea completions in the history of the offshore drilling industry with our two eighth generation drillships, the Deepwater Atlas and the Deepwater Titan. These completions are significant milestones in the Pro of achieving first oil for our customers in each of the high pressure, high temp [indiscernible] We express our sincere gratitude to Chevron and Beacon Offshore for their trust and our expertise to execute this important work.

In 2024, we continued to deploy new technologies to enhance our operational performance, and further differentiate our fleet by improving the safety, reliability and efficiency of our operations. We expanded the use of drilling automation in the fleet achieving an industry first on the Transocean Norge. Using the IntelliWell automation platform, which is installed in two rigs, we simultaneously conducted fully automated casing running and offline stand building operations. On these rigs, we tripped over 1,500,000 feet of drill pipe with no personnel in the Red Zone. And lastly, we co developed the rotary multi tool eliminate other manual tasks on the drill floor. This is now on its initial deployment on the Transocean Enable. We are actively using industrial robotics on three of our ultra deepwater drills The robotic riser bolting system automates the riser joint connection process one of the most taxing and hazardous activities we perform offshore. The system removes personnel from the Red Zone during riser handling operations. To date, we've handled over 3,000 rides of joints using the system greatly enhancing safety and efficiency, and are experiencing a significant surge of interest for additional customer driven deployments across the globe. In addition to the robotic systems, I would like to highlight [indiscernible] The Kinetic Blowout Stopper, a tubular shearing technology that is retro fittable to existing blowout preventers and HaloGuard, a monitoring and control system designed to stop drill floor moving equipment when traveling in close proximity to personnel.

The latter technology is now operational on eight of our rigs, resulting in even greater protection for our offshore teams. We are in discussions with a number of customers for more installations of these and other products. Significantly, we recently signed an agreement with Petrobras for a customer funded installation of robotic riser on the deep battle and are nearing completion of an agreement to implement HaloGuard on four of our six rigs currently in contract [indiscernible] And finally, in 2024, we were granted 22 patent app industry leadership in innovation and technological development. Am proud of the work our team does each and every day Their commitment to operational excellence and innovation drives our success and the delivery of outstanding results for our customers. I'll now hand the call back to Jeremy. Thanks, Keelan. Looking at the various regions, starting in The U. S. Gulf, our analysis of the market suggests that most of the major contracts for work commencing in 2025 have already been awarded. And that rigs concluding work this year will likely remain available until at least 2026. Unless they're mobilized elsewhere. Fortunately, we are at present somewhat insulated from this market dynamic in the short term.

Remain encouraged by the future outlook. We continue to be engaged in multiple conversations across the customer spectrum for programs starting in 2026 and 2027, that specifically require our high specification high hook load drillships. Including work scopes that require the 20 ks completions capability of our eighth generation drillships. As such, we believe that our assets in The U. S. Gulf will remain in high demand for the foreseeable future. In Latin America, we expect the active rig count to remain relatively stable In Guyana, demand forecast suggests the five rigs currently on contract will remain working until at least 2028. In Suriname, Total recently tender for a program requiring one drillship commencing in late twenty twenty six. Approximately two years. In Brazil, we expect Petrobras to issue another multi rig and to maintain the number of rigs that is contracted for the foreseeable future. The company is scheduled to host a future scenario meeting with the drilling contractors later this week. To provide an update on its activity outlook.

Anticipate that this meeting will provide incremental clarity on the company's plans. With Petrobras' keen interest in our technology, we believe our assets are well positioned for its future programs. Importantly, other operators in Brazil are beginning to investigate rig availability for their programs commencing during the next several years. Most notably, Shell is planning to make its final investment decision within the next month for a multiyear development program commencing in 2027 for its Gato D'Amato project.

Additionally, BP is expected to move ahead with a short exploration campaign in late twenty twenty In Africa, we've not seen much change in demand over the last three months and expect there will be a short term supply driven imbalance as rigs roll off contract before new programs commence. We believe much of this work will start in 2026 and 2027, several operators are in tender process and or direct discussions for various programs in and around the West African coast.

Some of which may have a late twenty twenty five commencement. [indiscernible] In Norway, Equinor is out for tender for multiple rig lines with commencement date between the end of twenty twenty six and beginning of twenty twenty seven. We expect this work to be awarded in the second quarter. This combined with demand from other operators in Norway will require up to two rigs to return from outside the country in 2026. Additionally, the Norwegian Ministry of Petroleum and Energy plans to offer 76 blocks on the Norwegian Continental Shelf in the AP twenty twenty five licensing This is up from 53 licenses in the 2024 round. Farther East, more programs beginning to materialize in Australia for late twenty twenty six and '27. These include a one year program, a two year program and a five year program. In India, ONGC is expected to tender for one semi submersible and one drillship later this year. To fulfill these requirements would require rigs from outside the region. [indiscernible] Finally, in Malaysia, PTTEP will retender for its program with a revised start date of mid-twenty twenty six. Overall, our outlook remains upbeat given our position of near 100% utilization throughout 2025 particularly positive for a tighter market in 2026 and beyond.

Thus far dayrates have been fairly resilient in the context of an anticipated temporary rig supply We are also encouraged by recent fleet rationalization announcements made by competitors In our view, both of these are strong indications of healthy industry dynamics. From a macro perspective, our customers are increasingly focused on the traditional oil.

This was reinforced earlier this month when Equinor communicated that it expects to gross production by 10% between 2024 and 2025. While concurrently reducing investment in renewables and other low carbon technology by $5,000,000,000 half its previous target, over that same period. According to RISET Energy, Deepwater CapEx sanctioning is projected to rebound in 2026 and 2027, more than doubling from 2025 estimates. These projections are consistent with the conversations we have with our customers and our view that we continue to be in a sustained up cycle. [indiscernible] With our active fleet largely contracted for the next eighteen months, our main focus for 2025 is on operational into revenue and the net revenue to cash. With that, Pat will now discuss our financial results. Beth? You, Jeremy, and good day to everyone. During today's call, I will briefly recap our fourth quarter results, provide guidance for the first quarter of twenty twenty five and conclude with an update of our expectations for the full year. Disclosed in our press release, for the fourth quarter, we reported a net income attributable to controlling interest of $7,000,000 or a net loss of $0.11 per diluted share. The net loss per share is caused by the impact of certain financial instruments related to value changes in our exchangeable bonds, Please refer to note 11 in our forthcoming annual report for additional information regarding the effects of our convertible debt instruments on net income.

During the quarter, we generated adjusted EBITDA of $323,000,000 and cash flow from operations of approximately $2.00 $6,000,000 Positive unlevered free cash flow of $177,000,000 reflects the $2.00 $6,000,000 of operating cash flow net of $29,000,000 of capital expenditures. During the fourth quarter, we delivered contract drilling revenues of nine within our guidance range at an average daily revenue of approximately $435,000 Operating and maintenance expense in the fourth quarter was $579,000,000 This fell slightly below the lower end of our forecast range primarily due to the delay of non critical and service maintenance activities for our active fleet way contract preparation costs for the Transocean balance a favorable resolution of old contingencies.

G and A expense in the fourth quarter was $56,000,000 We ended the fourth quarter with total liquidity of approximately $1,500,000,000 This includes unrestricted cash and cash equivalents of $560,000,000 about $381,000,000 of restricted cash the majority of which is reserved for debt service and $576,000,000 of capacity from our undrawn credit facility. I'll now provide guidance ranges for the first quarter of twenty twenty five and an update on our here. As always, our guidance excludes speculative reactivations and upgrades. For the first quarter, we expect contract drilling revenues to be between $870,000,000 and $890 based upon an average fleet wide revenue efficiency of 96.5% on our working rigs, which as you know can vary based upon uptime performance, weather and other factors. This estimate always includes between $55,000,000 and $65,000,000 of additional services and reimbursable expenses. Please recall that these additional services and customer reimbursables generally carry low single digit margins. The quarter over quarter decrease in contract drilling revenues is primarily caused by lower activity within the active fleet due to mobilization out of service activities and contract preparation periods.

We expect first quarter O and M expense to be within a range of approximately $610,000,000 $630,000,000 This quarter over quarter increase is primarily due to out of service and contract preparation periods, including those on the Spitzbergen Invictus, Equinox and Endurance. We expect G and A expense for the first quarter to fall within a range of approximately $5,055,000,000 dollars This quarter over quarter decrease is primarily due to higher legal fees incurred in the fourth quarter of twenty twenty four that we do not expect to repeat. Net interest expense for the first quarter is forecast to be between $140,000,000 and 100 comprising interest expense and interest income of about $150,000,000 and between $5,000,000 and $10,000,000 respectively. Capital expenditures for the first quarter are forecasted to be expected to be about $13,000,000 the full year 2025, we currently forecast contract drilling revenue to be between $3,850,000,000 to $95,000,000,000 and the limited availability of our The preliminary guidance we provided in the third quarter twenty twenty four earnings call, mainly due to shorter than expected activity for the Deepwater Skiros, The Result Of Customer Changing Its Well Schedule And Unfavorable Foreign Exchange Movement Impacting The Remeasurement Of Our Local Currency Contracts In Brazil This is largely offset in our OAM cost due to transactions that are settled in local currencies.

We expect our full year O and M expense to be between $2,300,000,000 and $2,400,000,000 in line with our previous guidance. And we still anticipate G and A cost to be between $190,000,000 and $200,000,000 For the full year, we're anticipating net interest expense between $550,000,000 and $555,000,000 comprised in interest expense and interest income of about $580,000,000 and between $25,000,000 and $30,000,000 respectively. Cash taxes for the year are forecasted to be between $65,000,000 and $70,000,000 Our projected liquidity at year end 2025 is currently forecasted to be reflecting our revenue and cost guidance and including our undrawn revolving credit facility and restricted cash of approx dollars most of which is reserved for debt service. This liquidity forecast includes 2025 CapEx expectations of approximately 100 and million dollars of which approximately $70,000,000 is related to customer acquired capital upgrades for upcoming projects and capital spares and approximately $60,000,000 of sustaining capital investment. As a reminder, for the terms of our credit agreement, the capacity of the facility declined to $510,000,000 $576,000,000 effective late June twenty twenty five. As Jerry mentioned, we are fully committed to efficiently converting our backlog to revenue and not revenue to cash. So in addition to our intense focus on providing superior operational execution for our customers, are exploring ways to materially improve our cost structure.

At the outset of this year, we commenced an enterprise wide evaluation to identify areas in which without compromising our ability to provide safe, reliable and the most efficient operations possible. This creates value for both our customers and our shareholders and we will use the savings to accelerate the leveraging of our balance sheet. Once this evaluation is complete, we will provide a definitive savings target in timeline for achieving it and we expect to provide this guidance when we report our first quarter twenty twenty five results in April. That concludes my prepared remarks and I'll now turn the call back to Jeremy for some concluding comments before we start Q and A. Thank you, Pat. Before we move to Q and A, I would also like to share the following. April 22 will mark my tenth year as the CEO of Transocean. Over the past several years, we, management and the Board, have worked diligently to define and execute succession plans with the objective of developing and recognizing our incredibly deep bench of internal talent while simultaneously maintaining business and leadership continuity. Over those years, just looking around the room, we promoted and expanded the responsibilities of Keelan Adamson to the position of President and Chief Operating Officer, Ryder Mackenzie to Executive Vice President and Chief Commercial Officer Brady Long, to Executive Vice President and Chief Legal Officer and last year, Thad Beta to Executive Vice President and Chief Financial Officer.

As you will have read in this morning's press release, today I'm pleased to announce that we will continue the progression of the succession plan by soon naming Keelan Adams and Transocean's Transocean President and Chief Executive Officer. The next few months, I will assist Keelan with the Transocean. Which we expect will take place during the second quarter of twenty twenty five. And I will continue as a Board member through our twenty twenty five Annual General Meeting. Where shareholders will be asked to elect Keelan to the Board, elect our current Board Chair, Chad Deaton as a Director and elect me as Executive Chairman. At that time, Chad will transition the role of Lead Independent I'd like to thank the Board and the entire Transocean team for their trust and support these past ten years. An incredibly challenging time in offshore drilling, I am proud of the fact that we are the only publicly traded offshore drilling company to survive the downturn without restructuring. Now on a path to materially delever the balance sheet. I'm also proud of the transformation on our fleet and that we continue to introduce innovative technology to the industry, which improves safety and drilling efficiency.

But most of all, I'm proud of the team and culture we built to Transocean. [indiscernible] I could not be more excited about transitioning the leadership of this company to Keyland. A man who spent the past three decades of his life with the company. Starting out on the drill floor and progressing all the way to the executive ranks. There was no one more capable or deserving of this opportunity and I look forward to the positive impact he and the team will have on the company as they further Transocean position as the undisputed leader in offshore drilling. Before we move to Q and A, I just want to once again thank the Board and the Transocean team. Is my honor to work alongside all of you. Thank you, Ms. Johnson.

We'll take our first question from Eddie Kim with Barclays. Please go ahead.

Hey, good morning. Jeremy, I suppose it's only been ten years, but Some years are much longer than others. So congratulations on what I'll call maybe an effective twenty year career at Transocean and well deserved transition away from having to speak to guys like us all the time. Thanks, Eddie. I appreciate it. My first question is just around the potential day rates we could see on contracts later this year. Obviously Transocean is very well insulated. But we've had whitespace concerns industry wide.

And your regional commentary also suggests some temporary supply demand imbalance this year. So in light of that, do you think we could see a contract announcement for a seven gs drillship at a day rate, maybe even as low as 350,000 a day. Just curious about your thoughts there. Yes. Eddie, I think I'll take that one. This is Roddy.

So look, I mean, what we see at the moment is there's not that many opportunities available in 2025. So we actually think it's pretty unlikely that you're going to see many fixtures at significantly lower There may be one or two, but in all honesty, I think unless those opportunities are in direct continuation, the drilling community is unlikely to sacrifice a kind of a longer term deal at a lower rate to to try and plug a gap that's perhaps not on the table, if you know what I mean. So I think it's possible that you might see some data dip down into the 3s for the for the kind of commodity seventh gen rigs.

I don't think you're going to see any of that, especially for the higher spec units. I also think [indiscernible] because there's not that many opportunities in 2025, I think a lot of the drillers will be patient in that regard. And But most of the work that we're looking at just now, as Jeremy had mentioned in his prepared comments, is for multiple years. So the concept of starting something in '26 or '27 for two or three years and doing it based on a temporary short term dip in the market doesn't really make sense to me certainly. So I'm not sure you're going to see that many of these low fixtures. Certainly, we haven't seen very many published so far.

Got it.

Got it. Understood. And my follow-up is just on your three seventh generation cold stacked rigs, the Belo, Athena and Apollo, One of your peers, as you mentioned, just announced their time of their seven gs stacked rig, which isn't necessarily the best indicator of of forward demand. There are also a handful of other seven gs coal stack rigs The contractors could be more motivated in putting their rigs back to work. So in light of that, how are you reactivation of your seven gs rigs? And do you think it's likely that we could see one of them working before 2028.

Yes. Good question, Eddie. We continue to evaluate our fleet. Not even a quarterly exercise, it's more frequent than that. And of course, take into account how long has the rig been stacked, what do we think the cost reactivate and of course that tends to go up the longer they've been stacked. And then when do we think they're going to come back into the market and what day rate. And so, we will continue that process.

Could or could not lead to changes in the fleet over time. But I would say the three seventh gen rigs, we still believe are but we're going to be disciplined If the customer is not willing to pay for the reactivation in the first contract with a decent return for us, then we won't move forward and we'll just continue to evaluate their future on an ongoing basis.

Got it. Thank you for that color. I'll turn it back.

Thank you. And our next question comes from Kurt Hallead with Benchmark Hey, good morning and Good morning Kurt. Don't mean to one off Eddie on this, but in this business probably more like dog year, so ten years is like seventy. So who knows? I certainly look at Curt. No, not quite. But congrats and I know it's been a tough road and and you guys took a solo path on. On trying to preserve as much shareholder equity as possible. It looks like you're on the verge seeing that to fruition. So kudos on that front for sure. And Keelan, be careful what you wish for, man. The wolves are howling, man. We're coming after you. Appreciate that Curt. Thanks, Curt. Got it. All right. So yes, great summary here what's going on with the market dynamics. But maybe coming back around to to one of answers that Roddy gave on. On commodity seven gs. So it sounds like we have yet another layer to consider or another tier to consider in the context of seven gs drillship So, Roddy, can you again once again help us kind of how do you define a commodity seven gs drillship and and how do we think about the tiers right now?

Yes, fair enough. Commodity seven gs, we kind of consider that the non high hook load rigs other rigs with single So typically you've got a bit of a split in the higher specifications. Normally that line is pretty bright between sixth generation and seventh generation. But within the seventh generation, you have we call them seven gs plus because they basically have super high hook load. They also typically have larger mud handling capacities and those kind of things. As well. So what that means is that the operators for the well designs and certainly the size of the casing runs, they can deploy are significantly larger and therefore more efficient than the the lower hook load rigs. So that's typically been our strategy over the past ten years is to really that class of asset because we believe that is the most desirable asset. And I think that definitely shown up in our results in terms of utilization of those assets.

Today, right now, I don't think there is a single 1,400 ton rig with any availability in 2025. So if you take it from that point of view, there's clearly a difference between those big rigs that are more capable and can unlock greater efficiencies for the customers versus the rest of the seventh gen. Makes sense?

Yes. I appreciate that. And then maybe the one follow-up then, Jeremy, you referenced having a number of different discussions for potential projects in 2026 and into 2027. Can you give us some sense on on how you're kind of navigating those discussions from a pricing standpoint and how much are your customers saying, well, look, if going to give you this deal in 2026, you got to give us 2025 pricing. How's that How's that discussion evolving? Yes. Good question, Kurt. I would say kind of adding on to Roddy's point, we're talking about the highest specification rigs in and we control most of them fortunately. So as we think about the ultra deepwater market and the harsh environment market, we are talking to these customers about rigs that we know that they need.

And so that kind of that kind of frames how we approach the contracting the day rates. So this little blip is certainly not helpful because our customers will use every advantage they can possibly get in negotiations. But we also know that assets are a value to them, our services are a value to them and we're going to price it accordingly. Got it.

All right. Thanks again.

Congrats, Keelan, and good luck in the next role, Jeremy. Thank you, Kurt. Thanks, Kurt.

Our next question comes from Frederic Stena with Clarksons Securities. Please go ahead.

Hey, Jeremy and team and congratulations again to Jeremy and Keelung.

I don't know what's longer than Dog Gear, so I'll just leave it at that. But we'd be interested To hear what you think about '25, 2026 and 2027 in general You gave some good commentary here in your prepared remarks. From my own discussions with investors, it seems like one of the key fears is that programs just continue to slip to the right and slip to the right and slip to the right. So I was wondering if there is anything in your discussions now maybe particularly around the work in 2026 and 2027 that gives you confidence that these things will Actually, new course or in your current expected timelines?

Sure. I'll let Roddy answer, but I'll just start. I think what's been most important to us throughout the years, there are all kinds of concerns about what could happen in the macro. There are all kinds of concerns about how it would impact, oil prices and that would impact demand for our assets and services. And from my perspective, I tend not to get caught up in those conversations. I tend to think more about what our customers are doing and what they're telling us and what they're pushing forward toward And everything that we're seeing right now suggests, yes, there is a slight lull in 2025.

But our customers are moving forward with these negotiations and these programs that are commencing in late 'twenty six and in 'twenty seven and they're multi year opportunities. And so all of that to me inspires confidence. Could it push to the right? Of course. I mean, who knows what can happen on the horizon? But everything we're seeing today seems to demonstrate they have resolved around these programs moving forward. And with that, I'll hand it over to Rodi because he's certainly neck deep in all of these discussions.

Yes, sure.

So I mean apart from the macro, which we're not going to touch on too much, but the macro in general is extremely healthy and has been for some time. And will continue to be. So I think I'll leave that up to the other analysts to reference the cases. But if you go look at anybody's case, I think Production of oil and gas is going to be significant going forward. Deepwater and harsh environment appear to be the most economical places to do that. So thinking about where we are in terms of 'twenty five and 'twenty six and 'twenty seven, If we think about where we were this time last year or let's say this time in 'twenty three, looking into 'twenty four, we basically had 77% utilization. [indiscernible] In 'twenty four, looking at sorry, in 'twenty three, you're looking at 'twenty four stood at 88% Today, looking into '25 for the year, we're looking at 96% plus.

So if you think about where we are in that that perspective, '25 looks extremely healthy. Arguably healthier than any of the previous years have looked in the past ten years. In addition to that, as we think about entering 2026, our utilization is about 93% entering 2026. And without tipping our hand to all the different things that we're working on, there's every opportunity that We could with a few fixtures made between now and say the middle of the year, [indiscernible] again in the high 90 percentile range for utilization throughout '26. So as I think about 2025, we are extremely solid. As I think about 2026, we are extremely optimistic that we'll be everybody is good. And you also mentioned '27. I have to tell you that a lot of programs that we're working on just now are actually starting in 'twenty seven. So either starting late 'twenty six or 'twenty seven. So again, if you're looking for a barometer on how the operators are thinking about the health of the market, the health of the drilling industry in general. If we're talking about multiyear jobs that start two years from now, I think that's a very healthy position to be from the both of you.

Thank you. Two quick ones on the back of that. First, Fad, could you repeat the liquidity guidance for 2025? Because maybe it was only me who had technical issues, but kind of dropped out there. And second, any update on the inspiration on the development driller? I'm sorry, so you want the full guidance for 2025? No, just the liquidity year end guidance. [indiscernible] $1,350,000,000 to $1,450,000,000 And with respect to your second question, so those two assets had been held for sale in anticipation of a transaction that ultimately did not materialize. We did cancel the sales purchase agreement in mid January. And are holding them as still held for sale throughout some other opportunities. I'd add to that, that given the circumstances, we are pursuing some [indiscernible] Thank you very much. That's it for me. Have a good day.

Our next question comes from Arun Jarai with JPMorgan. Please go ahead.

Yes, good morning. I was wondering if you can maybe elaborate on what you're seeing in the Brazil market, you mentioned that you'd expect Petrobras to hold relatively flat in terms of rig count with some potential for demand to increase as you push towards late 2026. You also mentioned that there's kind of a a meeting, a scenario meeting going on later this week with the drilling contractor. Maybe I was wondering if you could just give us a sense of how you see the tea leaves progressing in Brazil? And any future thoughts on how Petrobras may manage its future rig demand. In country?

Yes, I think I'll take that one.

Yes, so Petrobras have been very vocal about they're forward looking investments. So we actually have an update coming later this week [indiscernible] basically, if we think about where they were, from '23 to '24, there was a a rig count grew from 19 to 24 rigs. That's a healthy healthy increase. Then from 24 going into '24, we went up to 29 rigs. And now by the second half of twenty twenty five that expected to be somewhere between 32 to 33 rigs in Brazil. So that's really think Petrobras themselves are going to be operating something like 32 rigs with a few others in country. So as high as 35 to 37 rigs in country. So overall, I think Brazil is a very positive spot. We don't expect them to regress at any point.

A lot of the discussions that we have with Petrobras is kind of a full acknowledgment that they need all of the rigs they currently have under contract So I'm not going to say that they're going to add more, but typically if you need everything that's under contract, then there's a chance that there may be some incremental demand as the year goes on.

Great. And maybe my follow-up is for Thad. Could you maybe elaborate on the insurance recovery you had in the quarter? And just thoughts on does the 2025 O and M cost guide, does that contemplate some of the cost efficiency things that are contemplated by rig today?

So second question first, it does not. We've had this program in place since the beginning of this year, actually even a little bit before that. We are doing, as I mentioned, a good deal of research identifying different ways to do business differently. I will provide some guidance later on, but it is not included in our [indiscernible] And with respect to the question about the settlement, I'm going to refer you to the K but suffice it to say that's associated with an asbestos settlement. We received [indiscernible] Okay.

Thanks a lot, Jeremy. Best of luck to you.

Thank you very much.

Thank you. And our next question comes from Greg Lewis with BTIG. Please go ahead.

Hey, thank you and good morning everybody. Thanks for taking my question.

Jeremy, congratulations. [indiscernible] Good luck looking forward to talking to you a little bit more I guess my first question is, where everybody's hearing a lot about longer term multi year contracts coming we think about those, should we expect like six, nine month lead times for a working rig versus any kind of guidance versus the warm rig, how much time should we think about that versus a rig maybe that has been sitting on the sidelines for six, nine, twelve months or either longer. Yes. Good morning, Greg. Maybe I'll take that one. Obviously, it's a pretty wide question because it really the potential opportunity could be, right? So for a warm rig, depending on the regulatory environment, would going and the customer requirements three to six months, I suppose, getting a rig ready for that sort of work compared to in online coal stack unit that is still probably twelve to eighteen months to get ready for activity. In terms of active rigs, obviously, again, it kind of sits with the same requirement for what the customer regulatory means. That's obviously much quicker. Okay, great. And then then just obviously one of your competitors made a decision to remove a couple of rigs that have been on the sidelines that probably would be kind of on the higher end spectrum, just as you look across your fleet and I apologize if you maybe already answered through this, as you look at rigs maybe like The Americas or the Champions, how are you thinking about maybe being aggressive just removing those while they're not being competitively bid, they kind of sit out there and everybody looks at them in one there's maybe someday they come back to work?

Thank you.

Greg, thank you. Yes, we did answer that a little bit ago, but we we can kind of reiterate it. I would say that we we've been the most aggressive in the space at retiring assets. Of course, we had the largest fleet. But But we continue to look at our fleet and analyze the assets that are currently stacked at the cost to reactivate, we look at the time to reactivate, we look at what kind of day rates we think they could get and what kind of term and constantly assess the fleet and we'll continue to do that as we move through the balance of this year. And I'll take our last question from Josh Jain with Daniel Energy Partners. Thanks. Good morning. First one, we've talked a lot over the last year about Halo Guard and, Jeremy, this is something you've been big on the last few years for moving people from the rig floor, keeping them safe.

You could just use this opportunity to talk about where we go from here with respect to technology and rig safety. Sort of what's next and is there anything major see implemented over the next couple of years? Sure. Thanks for the question. I'll give it over to Keelan on that one.

Yes, that's a very interesting question. I think, obviously some great success with the deployment of HilarGuard and we're looking to get that much wider deployment across our fleet. And we have opportunities for the customer, we'll fund those as we go forward.

It's an ongoing process. We look at there are major accident hazard activities take place and what we're trying to do prevent and help our people have the right information at the right time to make decisions. So I would say any technology development that will assist our teams to do those things and prevent themselves from getting in harm's way or assist a critical decision moment by moment and day by day.

That's where we've been focusing our efforts in technology going forward.

And as my follow-up, talked about in the prepared remarks Gulf Of Mexico opportunities over the course of this year sort of in the next year sort of being flattish. There were some thoughts maybe with the new administration might allow for drilling activity to pick up in the Gulf.

Maybe your thoughts on what it would take for activity to grind higher there and just what are the puts and takes could move things potentially higher in the Gulf? Yes. I think with a favorable administration, that's obviously good for us. But these are long dated projects. They take a while to materialize. A lot of sanction. And so even with favorable regulation, it's probably going to take a little bit of time to push projects forward and to increase demand in the certainly not a bad thing. It's a positive thing. It just may take a little time. So I wouldn't expect anything in the near term to materially move the needle. But over time, it certainly should be helpful.

Thank you. And I'd like to turn the call over to Alex Johnson for any final or closing remarks. Thank you, Margaux. Thank you, everyone, for your participation on today's call. We look forward to speaking with you again when we report our first quarter twenty twenty five results.

Thank you. And ladies and gentlemen, that does conclude today's program.