Transocean executives outlined the rationale and expected financial benefits of the company’s planned all-stock acquisition of Valaris (NYSE:VAL) during a conference call, describing the transaction as a “transformational combination” aimed at positioning the combined business for what management characterized as a multi-year upcycle in offshore drilling.
Deal positioning and timing
Transocean President and CEO Keelan Adamson said the combination was “very well-timed,” citing an industry view that offshore drilling is entering a multi-year upcycle. Adamson pointed to expected increases in offshore investment and noted forecasts calling for a “150% increase in deep-water project sanctioning” by year-end 2027.
Fleet strategy and customer offering
Management emphasized that the two companies’ fleets are complementary. Adamson described the combined business as “a driller that is able to address any requirements in all water depths across the world,” adding that scale should help the company position itself for rising upstream capital spending “across all sectors.”
In prepared remarks, Adamson detailed the pro forma fleet mix, including:
- Seven harsh-environment semisubmersibles
- 24 7th-generation drillships and two 8th-generation drillships
- A 31-rig jack-up fleet, including 11 units designed for harsh environments
Adamson said Transocean was “excited to add jack-ups at this point in the cycle” and expects incremental cash flow from the segment. In the Q&A, he reiterated that Transocean “fully intend[s] to continue operating the jack-up fleet,” framing it as a strong cash flow contributor. Valaris CEO Anton Dibowitz similarly said jack-ups are “a strong cash flow contributing segment” for Valaris and will remain a “strong cash flow generating part of the combined entity.”
Synergies, cost reductions, and accretion
Adamson said Transocean identified more than $200 million in annual deal-related cost synergies. He noted these savings are in addition to Transocean’s ongoing cost reduction efforts, which he said already reduced the cost structure by about $100 million and are expected to deliver another $150 million in savings in 2026.
Adamson said the $200 million-plus in annual synergies, when capitalized, are expected to add more than $1.5 billion of value, which he characterized as roughly 15% of the combined market capitalization. He also said the transaction is expected to be accretive to free cash flow and earnings on a per-share basis after closing.
Responding to an analyst question on implementation costs, Transocean CFO Thad (last name not provided in the transcript) said management does not anticipate “a significant cost” to achieve the savings beyond typical restructuring elements, and that most savings are expected to come from operational efficiencies and reduced redundancies. The company did not provide a detailed breakdown of operating expense versus capital expense impacts.
Balance sheet goals, backlog, and closing timeline
Adamson highlighted deleveraging as a key objective, saying Transocean’s debt level “negatively impacts” equity value and that the transaction should help address that through increased cash generation. He said the combined company will have a pro forma backlog of more than $10 billion, providing visibility into future cash flow.
Adamson added that Transocean expects the leverage ratio to drop to about 1.5 times within 24 months of closing, alongside improved liquidity and a lower cost of capital. In response to questions, management said it was comfortable with contract coverage and did not assume “heroic” recontracting outcomes to reach the leverage target.
On shareholder returns, Adamson said the company’s priority remains strengthening the balance sheet, and that once leverage reaches appropriate levels the company would “evaluate every option.” Thad added that current limitations could change with the transaction and potential future capital restructuring, but suggested the company would be in a position to discuss returning capital after closing while emphasizing deleveraging in a cyclical, capital-intensive industry.
Management said it is focused on closing the transaction in the second half of 2026.
Regulatory review and fleet rationalization questions
Asked about potential regulatory challenges, Adamson said the companies conducted a “comprehensive review” and are “very confident” no regulatory issues are presented by the transaction.
On fleet rationalization, Adamson said Transocean has already divested a large number of rigs over recent years and indicated no immediate plans for further removals tied to the merger, while noting the company will continue to reevaluate fleet composition over time. Dibowitz addressed questions on specific Valaris rigs (DPS-1 and MS-1), saying they had a strong track record in Australia and that Valaris continues to market them globally, while maintaining financial discipline on costs when rigs lack near-term contracts.
Dibowitz said Valaris’ board, after considering the transaction with financial and legal advisors, determined the deal represents the best path to maximize shareholder value. He emphasized cultural alignment between the companies around safety and customer service and said Valaris shareholders would benefit from synergies and participate in the combined company’s potential upside.
About Valaris (NYSE:VAL)
Valaris PLC is a leading provider of offshore drilling services to the global energy industry. The company operates a diverse fleet of mobile offshore drilling units, including drillships, semisubmersibles and jackup rigs, designed to support exploration and production activities in deepwater, ultra-deepwater and harsh‐environment settings. Valaris serves a wide range of international oil and gas customers, offering turnkey drilling solutions, project management and advanced technology integration to enhance operational efficiency and safety.
Headquartered in Houston, Texas, Valaris maintains a significant presence in key offshore basins around the world.
