Exhibit 99.1

TRANSOCEAN LTD.

STATUTORY CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2023, 2022 and 2021

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	Ernst & Young AG Maagplatz 1 P.O. Box 8005 Zurich	Phone: +41 58 286 31 11 Fax: +41 58 286 30 04 www.ey.com/ch

To the General Meeting of	Zurich, February 20, 2024
Transocean Ltd., Steinhausen

Report of the statutory auditor

Report on the audit of the consolidated financial statements

	Opinion We have audited the accompanying consolidated financial statements of Transocean Ltd. and its subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive loss, equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes, including a summary of significant accounting policies. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles (US GAAP) and comply with Swiss law.
	Basis for opinion We conducted our audit in accordance with Swiss law, Swiss Standards on Auditing (SA-CH) and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB standards).  Our responsibility is to express an opinion on these consolidated financial statements based on our audit and our responsibilities under those provisions and standards are further described in the “Auditor's responsibilities for the audit of the consolidated financial statements” section of our report.  We are a public accounting firm and are independent of the Company in accordance with the provisions of Swiss law, U.S. federal securities law, together with the requirements of the Swiss audit profession, the U.S. Securities and Exchange Commission and the PCAOB and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion.
	Critical audit matters The critical audit matters communicated below are the matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.  The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

	Income Taxes
Description of the Matter	As discussed in Notes 2 and 11 to the consolidated financial statements, the Company operates in multiple jurisdictions through a complex operating structure and is subject to applicable tax laws, treaties or regulations in each jurisdiction where it operates.  The Company’s provision for income taxes is based on the tax laws and rates applicable in each jurisdiction.  The Company recognizes tax benefits they believe are more likely than not to be sustained upon examination by the taxing authorities based on the technical merits of the position. Auditing management’s provision for income taxes and related deferred taxes was complex because of the Company’s multi-national operating structure.  In addition, a higher degree of auditor judgment was required to evaluate the Company’s deferred tax provision as a result of the Company’s interpretation of tax law in certain jurisdictions across its multiple subsidiaries.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s income tax provision process, including controls over management’s review of the identification and valuation of deferred income taxes and changes in tax laws and regulations that may impact the Company’s deferred income tax provision.

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Our audit procedures also included, among others, (i) obtaining an understanding of the Company’s overall tax structure, evaluating changes in the Company’s tax structure that occurred during the year as well as changes in tax law, and assessing the interpretation of those changes under the relevant jurisdiction’s tax law; (ii) utilizing tax resources with appropriate knowledge of local jurisdictional laws and regulations; (iii) evaluating the completeness and accuracy of deferred income taxes, and (iv) assessing the reasonableness of the Company’s valuation allowance on deferred tax assets, including projections of taxable income from the future reversal of existing taxable temporary differences.

	Loss on Disposal of Ocean Rig Olympia
Description of the Matter	As discussed in Notes 4 and 7 to the consolidated financial statements, the Company made a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia, and related assets, with an estimated fair value of $85 million, in exchange for a noncontrolling ownership interest in Global Sea Mineral Resources NV.  As a result, the Company recognized a loss of $169 million, associated with the disposal of the rig and related assets for the year ended December 31, 2023. Auditing management’s estimate of the fair value of Ocean Rig Olympia and related assets was complex and judgmental due to the estimation required in determining the fair value of Ocean Rig Olympia.  In particular, the fair value estimate of Ocean Rig Olympia was sensitive to significant assumptions such as the discount rate, rig utilization, revenue efficiency and dayrates.
How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to determine the fair value of the rig and related loss on disposal of assets calculation, including controls over management’s review of the significant assumptions described above as well as over the underlying data used in the fair value and related loss determination. To test the estimated fair value of Ocean Rig Olympia we performed audit procedures that included, among others, (i) assessing the valuation methodologies utilized by management; (ii) testing the significant assumptions discussed above; (iii) testing the completeness and accuracy of the underlying data used by the Company in its analysis; and (iv) testing the mathematical accuracy of the fair value and related loss on disposal of assets calculations.  We involved a valuation specialist to assist in our evaluation of the Company's model, valuation methodology and significant assumptions.  We reviewed for contrary evidence related to the determination of the fair value of the rig and related loss on disposal of assets, including reviewing relevant market data and internal Company forecasts.

Other information The Board of Directors is responsible for the other information.  The other information comprises the information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the compensation report and our auditor’s reports thereon.  The annual report is expected to be made available to us after the date of this auditor's report. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work perform, we conclude that there is a material misstatement of this other information, we are required to report that fact.

Board of Directors’ responsibilities for the consolidated financial statements The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with US GAAP and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

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Auditor's responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, SA-CH and PCAOB standards will always detect a material misstatement when it exists.  Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law, SA-CH and PCAOB standards, we exercise professional judgment and maintain professional skepticism throughout the audit.  We also: „ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. „ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. „ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made. „ Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.  If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.  Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.  However, future events or conditions may cause the Company to cease to continue as a going concern. „ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. „ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements.  We are responsible for the direction, supervision and performance of the Company’s audit.  We remain solely responsible for our audit opinion. We communicate with the Board of Directors and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors and the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters arising from the audit of the consolidated financial statements that were communicated or required to be communicated to the Board of Directors and the Audit Committee, we determine those matters that related to accounts or disclosures that are material to the consolidated financial statements and involved especially challenging, subjective, or complex auditor judgment in the current period and are therefore critical audit matters.

Report on other legal and regulatory requirements In accordance with Art. 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved. We have served as the Group’s auditor since 2008.

Ernst & Young Ltd
/s/ Reto Hofer	/s/ Ralph Petermann
Licensed audit expert	Certified public accountant
(Auditor in charge)

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Years ended December 31,
	2023		2022		2021
Contract drilling revenues	$	2,832	$	2,575	$	2,556
Costs and expenses
Operating and maintenance		1,986		1,679		1,697
Depreciation and amortization		744		735		742
General and administrative		187		182		167
		2,917		2,596		2,606
Loss on impairment of assets		(57)		—		—
Loss on disposal of assets, net		(183)		(10)		(62)
Operating loss		(325)		(31)		(112)
Other income (expense), net
Interest income		52		27		15
Interest expense, net of amounts capitalized		(646)		(561)		(447)
Gain (loss) on retirement of debt		(31)		8		51
Other, net		9		(5)		23
		(616)		(531)		(358)
Loss before income tax expense		(941)		(562)		(470)
Income tax expense		13		59		121
Net loss		(954)		(621)		(591)
Net income attributable to noncontrolling interest		—		—		1
Net loss attributable to controlling interest	$	(954)	$	(621)	$	(592)
Loss per share, basic and diluted	$	(1.24)	$	(0.89)	$	(0.93)
Weighted-average shares, basic and diluted		768		699		637

See accompanying notes.

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

	Years ended December 31,
	2023		2022		2021
Net loss	$	(954)	$	(621)	$	(591)
Net income attributable to noncontrolling interest		—		—		1
Net loss attributable to controlling interest		(954)		(621)		(592)
Components of net periodic benefit costs before reclassifications		6		(109)		175
Components of net periodic benefit costs reclassified to net loss		—		3		10
Other comprehensive income (loss) before income taxes		6		(106)		185
Income taxes related to other comprehensive income (loss)		2		5		(6)
Other comprehensive income (loss)		8		(101)		179
Other comprehensive income attributable to noncontrolling interest		—		—		—
Other comprehensive income (loss) attributable to controlling interest		8		(101)		179
Total comprehensive loss		(946)		(722)		(412)
Total comprehensive income attributable to noncontrolling interest		—		—		1
Total comprehensive loss attributable to controlling interest	$	(946)	$	(722)	$	(413)

See accompanying notes.

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	December 31,
	2023		2022
Assets
Cash and cash equivalents	$	762	$	683
Accounts receivable, net		512		485
Materials and supplies, net		426		388
Restricted cash and cash equivalents		233		308
Other current assets		193		144
Total current assets		2,126		2,008
Property and equipment		23,875		24,217
Less accumulated depreciation		(6,934)		(6,748)
Property and equipment, net		16,941		17,469
Contract intangible assets		4		56
Deferred tax assets, net		44		13
Other assets		1,139		890
Total assets	$	20,254	$	20,436
Liabilities and equity
Accounts payable	$	323	$	281
Accrued income taxes		23		19
Debt due within one year		370		719
Other current liabilities		681		539
Total current liabilities		1,397		1,558
Long-term debt		7,043		6,628
Deferred tax liabilities, net		540		493
Other long-term liabilities		858		965
Total long-term liabilities		8,441		8,086
Commitments and contingencies
Shares, CHF 0.10 par value, 1,021,294,549 authorized, 142,362,093 conditionally authorized, 843,715,858 issued
and 809,030,846 outstanding at December 31, 2023, and 905,093,509 authorized, 142,362,675 conditionally
authorized, 797,244,753 issued and 721,888,427 outstanding at December 31, 2022		81		71
Additional paid-in capital		14,544		13,984
Accumulated deficit		(4,033)		(3,079)
Accumulated other comprehensive loss		(177)		(185)
Total controlling interest shareholders’ equity		10,415		10,791
Noncontrolling interest		1		1
Total equity		10,416		10,792
Total liabilities and equity	$	20,254	$	20,436

See accompanying notes.

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(in millions)

	Years ended December 31,			Years ended December 31,
	2023	2022	2021	2023		2022		2021
	Quantity			Amount
Shares
Balance, beginning of period	722	655	615	$	71	$	64	$	60
Issuance of shares	87	67	40		10		7		4
Balance, end of period	809	722	655	$	81	$	71	$	64
Additional paid-in capital
Balance, beginning of period				$	13,984	$	13,683	$	13,501
Share-based compensation					40		29		28
Issuance of shares					520		256		154
Issuance of warrants					—		16		—
Balance, end of period				$	14,544	$	13,984	$	13,683
Accumulated deficit
Balance, beginning of period				$	(3,079)	$	(2,458)	$	(1,866)
Net loss attributable to controlling interest					(954)		(621)		(592)
Balance, end of period				$	(4,033)	$	(3,079)	$	(2,458)
Accumulated other comprehensive loss
Balance, beginning of period				$	(185)	$	(84)	$	(263)
Other comprehensive income (loss) attributable to controlling interest					8		(101)		179
Balance, end of period				$	(177)	$	(185)	$	(84)
Total controlling interest shareholders’ equity
Balance, beginning of period				$	10,791	$	11,205	$	11,432
Total comprehensive loss attributable to controlling interest					(946)		(722)		(413)
Share-based compensation					40		29		28
Issuance of shares					530		263		158
Issuance of warrants					—		16		—
Balance, end of period				$	10,415	$	10,791	$	11,205
Noncontrolling interest
Balance, beginning of period				$	1	$	1	$	3
Total comprehensive income attributable to noncontrolling interest					—		—		1
Acquisition of noncontrolling interest					—		—		(3)
Balance, end of period				$	1	$	1	$	1
Total equity
Balance, beginning of period				$	10,792	$	11,206	$	11,435
Total comprehensive loss					(946)		(722)		(412)
Share-based compensation					40		29		28
Issuance of shares					530		263		158
Issuance of warrants					—		16		—
Acquisition of noncontrolling interest					—		—		(3)
Balance, end of period				$	10,416	$	10,792	$	11,206

See accompanying notes.

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Years ended December 31,
	2023		2022		2021
Cash flows from operating activities
Net loss	$	(954)	$	(621)	$	(591)
Adjustments to reconcile to net cash provided by operating activities:
Amortization of contract intangible asset		52		117		220
Depreciation and amortization		744		735		742
Share-based compensation expense		40		29		28
Loss on impairment of assets		57		—		—
Loss on impairment of investment in unconsolidated affiliates		5		—		37
Loss on disposal of assets, net		183		10		62
Fair value adjustment to bifurcated compound exchange feature		127		157		—
Amortization of debt-related balances, net		51		33		25
(Gain) loss on retirement of debt		31		(8)		(51)
Deferred income tax expense		18		46		128
Other, net		43		44		52
Changes in deferred revenues, net		70		(20)		(108)
Changes in deferred costs, net		(190)		1		(6)
Changes in other operating assets and liabilities, net		(113)		(75)		37
Net cash provided by operating activities		164		448		575
Cash flows from investing activities
Capital expenditures		(427)		(717)		(208)
Investments in equity of unconsolidated affiliates		(10)		(42)		(1)
Investment in loans to unconsolidated affiliates		(3)		(5)		(33)
Proceeds from disposal of assets, net		10		7		9
Cash acquired in acquisition of unconsolidated affiliate		7		—		—
Net cash used in investing activities		(423)		(757)		(233)
Cash flows from financing activities
Repayments of debt		(1,717)		(554)		(606)
Proceeds from issuance of debt, net of issue costs		1,983		175		—
Proceeds from issuance of shares, net of issue costs		—		263		158
Proceeds from issuance of warrants, net of issue costs		—		12		—
Other, net		(3)		(8)		(42)
Net cash provided by (used in) financing activities		263		(112)		(490)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents		4		(421)		(148)
Unrestricted and restricted cash and cash equivalents, beginning of period		991		1,412		1,560
Unrestricted and restricted cash and cash equivalents, end of period	$	995	$	991	$	1,412

See accompanying notes.

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Business

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells.  As of December 31, 2023, we owned or had partial ownership interests in and operated a fleet of 37 mobile offshore drilling units, consisting of 28 ultra-deepwater floaters and nine harsh environment floaters.  As of December 31, 2023, we were constructing one ultra-deepwater drillship.

We provide, as our primary business, contract drilling services in a single operating segment, which involves contracting our mobile offshore drilling rigs, related equipment and work crews to drill oil and gas wells.  We specialize in technically demanding regions of the global offshore drilling business with a particular focus on ultra-deepwater and harsh environment drilling services.  Our drilling fleet is one of the most versatile fleets in the world, consisting of drillships and semisubmersible floaters used in support of offshore drilling activities and offshore support services on a worldwide basis.

We perform contract drilling services by deploying our high-specification fleet in a single, global market that is geographically dispersed in oil and gas exploration and development areas throughout the world.  The location of our rigs and the allocation of our resources to build or upgrade rigs are determined by the activities and needs of our customers.

Note 2—Significant Accounting Policies

Accounting estimates—To prepare financial statements in accordance with accounting principles generally accepted in the United States (“U.S.”), we must make judgments by applying estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates and assumptions, including those related to our income taxes, property and equipment, equity investments, contingencies, allowance for excess materials and supplies, assets held for sale, intangibles, postemployment benefit plans and share-based compensation.  We base our estimates and assumptions on historical experience and other factors that we believe are reasonable.  Actual results could differ from such estimates.

Fair value measurements—We estimate fair value at an exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  Our valuation techniques require inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) significant observable inputs, including unadjusted quoted prices for identical assets or liabilities in active markets (“Level 1”), (2) significant other observable inputs, including direct or indirect market data for similar assets or liabilities in active markets or identical assets or liabilities in less active markets (“Level 2”) and (3) significant unobservable inputs, including those that require considerable judgment for which there is little or no market data (“Level 3”).  When a valuation requires multiple input levels, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.

Consolidation—We consolidate entities in which we have a majority voting interest and entities that meet the criteria for variable interest entities for which we are deemed to be the primary beneficiary for accounting purposes.  We eliminate intercompany transactions and accounts in consolidation.  We apply the equity method of accounting for an equity investment in an unconsolidated entity if we have the ability to exercise significant influence over the entity that (a) does not meet the variable interest entity criteria or (b) meets the variable interest entity criteria, but for which we are not deemed to be the primary beneficiary.  We measure other equity investments at fair value if the investment has a fair value that is readily determinable; otherwise, we measure the investment at cost, less any impairment.  We separately present within equity on our consolidated balance sheets the ownership interests attributable to parties with noncontrolling interests in our consolidated subsidiaries, and we separately present net income attributable to such parties on our consolidated statements of operations.  See Note 4—Unconsolidated Affiliates and Note 14—Equity.

Functional currency—We consider the U.S. dollar to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.  We recognize currency exchange rate gains and losses in other, net.  In the years ended December 31, 2023, 2022 and 2021, we recognized a net gain of $10 million, a net loss of $8 million and a net loss of $1 million, respectively, related to currency exchange rates.

Revenues and related pre-operating costs—We recognize revenues earned under our drilling contracts based on variable dayrates, which range from a full operating dayrate to lower rates or zero rates for periods when drilling operations are interrupted or restricted, based on the specific activities we perform during the contract on an hourly, or more frequent, basis.  Such dayrate consideration is attributed to the distinct time period to which it relates within the contract term, and therefore, is recognized as we perform the services.  When the operating dayrate declines over the contract term, we recognize revenues on a straight-line basis over the estimated contract period.  We recognize reimbursement revenues and the corresponding costs as we provide the customer-requested goods and services, when such reimbursable costs are incurred while performing drilling operations.  Prior to performing drilling operations, we may receive pre-operating revenues, on either a fixed lump-sum or variable dayrate basis, for mobilization, contract preparation, customer-requested goods and services or capital upgrades, for which we record a contract liability and recognize as revenues on a straight-line basis over the estimated contract period.  We recognize losses for loss contracts as such losses are incurred.  We recognize revenues for demobilization

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

over the contract period unless otherwise constrained.  We recognize revenues from contract terminations as we fulfill our obligations and all contingencies have been resolved.  We apply the optional exemption that permits us to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is typically based on a single performance obligation consisting of a series of distinct hourly, or more frequent, periods, the variability of which will be resolved at the time of the future services.

To obtain contracts with our customers, we incur pre-operating costs to prepare a rig for contract and mobilize a rig to the drilling location.  We defer such pre-operating contract preparation and mobilization costs for recognition in operating and maintenance costs over the estimated contract period on a straight-line basis, consistent with the general pace of activity.  See Note 5—Revenues.

Income taxes—We provide for income taxes based on expected taxable income, statutory rates and tax laws in the jurisdictions in which we operate or have a taxable presence.  We recognize the effect of changes in tax laws as of the date of enactment.  We recognize potential global intangible low-taxed income inclusions as a period cost.

We maintain liabilities for estimated tax exposures in our jurisdictions of operation, and we recognize the provisions and benefits resulting from changes to those liabilities in our income tax expense or benefit along with related interest and penalties.  Income tax exposure items include potential challenges to permanent establishment positions, intercompany pricing, disposition transactions, and withholding tax rates and their applicability.  These tax exposures are resolved primarily through the settlement of audits within these tax jurisdictions or by judicial means, but can also be affected by changes in applicable tax law or other factors, which could cause us to revise past estimates.

We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the deferred tax assets and liabilities are expected to be recovered or paid.  In evaluating our ability to realize deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses in recent years.  We record a valuation allowance for deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.  For example, we may record a valuation allowance for deferred tax assets resulting from net operating losses incurred during the year in certain jurisdictions for which the benefit of the losses will not be realized or for foreign tax credit carryforwards that may expire prior to their utilization.  See Note 11—Income Taxes.

Cash and cash equivalents—We consider cash equivalents to include highly liquid debt instruments with original maturities of three months or less, such as time deposits with commercial banks that have high credit ratings, U.S. Treasury and government securities, Eurodollar time deposits, certificates of deposit and commercial paper.  We may also invest excess funds in no-load, open-ended, management investment trusts.  Such management trusts invest exclusively in high-quality money market instruments.

Restricted cash and cash equivalents—We maintain restricted cash and cash equivalents that are either pledged for debt service under certain bond indentures, as required under certain bank credit arrangements, or held in accounts that are subject to restrictions due to legislation, regulation or court order.  We classify such restricted cash and cash equivalents in current assets if the restriction is expected to expire or otherwise be resolved within one year or if such funds are considered to offset liabilities that are properly classified as current liabilities. See Note 9—Debt.

Materials and supplies—We record materials and supplies at their average cost less an allowance for excess items.  We estimate the allowance for excess items based on historical experience and expectations for future use of the materials and supplies.  At December 31, 2023 and 2022, our allowance for excess items was $198 million and $199 million, respectively.

Property and equipment—We apply judgment to account for our property and equipment, consisting primarily of offshore drilling rigs and related equipment, related to estimates and assumptions for cost capitalization, useful lives and salvage values.  We base our estimates and assumptions on historical experience and expectations regarding future industry conditions and operations.  At December 31, 2023, the aggregate carrying amount of our property and equipment represented approximately 84 percent of our total assets.

We capitalize expenditures for newbuilds, renewals, replacements and improvements, including capitalized interest, if applicable, and we recognize the expense for maintenance and repair costs as incurred.  For newbuild construction projects, we also capitalize the initial preparation, mobilization and commissioning costs incurred until the drilling unit is placed into service.  Upon sale or other disposition of an asset, we recognize a net gain or loss on disposal of the asset, which is measured as the difference between the net carrying amount of the asset and the net proceeds received.  We compute depreciation using the straight-line method after allowing for salvage values.

The estimated original useful life of our drilling units is 35 years, our buildings and improvements range from three to 30 years and our machinery and equipment range from four to 20 years.  We reevaluate the remaining useful lives and salvage values of our rigs when certain events occur that directly impact the useful lives and salvage values of the rigs, including changes in operating condition, functional capability and market and economic factors.  When evaluating the remaining useful lives of rigs, we also consider major capital upgrades required to perform certain contracts and the long-term impact of those upgrades on future marketability.

Long-lived asset impairment—We review the carrying amounts of long-lived assets, including property and equipment and right-of-use assets, for potential impairment when events occur or circumstances change that indicate that the carrying amount of such assets may not be recoverable.  For assets classified as held and used, we determine recoverability by evaluating the estimated undiscounted future net cash flows based on projected dayrates and utilization of the asset group under review.  We consider our asset groups to be

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

ultra-deepwater floaters and harsh environment floaters.  When an impairment of one or more of our asset groups is indicated, we measure an impairment as the amount by which the carrying amount of the asset group exceeds its estimated fair value.  We measure the fair values of our asset groups by applying a variety of valuation methods, incorporating a combination of income, market and cost approaches, using projected discounted cash flows and estimates of the exchange price that would be received for the assets in the principal or most advantageous market for the assets in an orderly transaction between market participants as of the measurement date.  For an asset classified as held for sale, we consider the asset to be impaired to the extent its carrying amount exceeds its estimated fair value less cost to sell.  See Note 7—Long-Lived Assets.

Equity investments and impairment—We review our equity-method investments, and other equity investments for which a readily determinable fair value is not available, for potential impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable in the near term.  If we determine that an impairment that is other than temporary exists, we recognize an impairment loss, measured as the amount by which the carrying amount of the investment exceeds its estimated fair value.  To estimate the fair value of the investment, we apply valuation methods that rely primarily on the income and market approaches.  In the years ended December 31, 2023 and 2021, we recognized a loss of $5 million and $37 million, respectively, associated with the other-than-temporary impairment of the carrying amount of our equity investments.  We amortize the basis difference caused by such impairments using the straight-line method over the estimated life of the asset.  See Note 4—Unconsolidated Affiliates.

Pension and other postemployment benefit plans—We use a measurement date of January 1 for determining net periodic benefit costs and December 31 for determining plan benefit obligations and the fair values of plan assets.  We determine our net periodic benefit costs based on a market-related value of assets that reduces year-to-year volatility by including investment gains or losses subject to amortization over a five-year period from the year in which they occur.  We calculate investment gains or losses for this purpose as the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets.  If gains or losses exceed 10 percent of the greater of plan assets or plan liabilities, we amortize such gains or losses over the average expected future service period of the employee participants.

We measure the actuarially determined obligations and related costs for our defined benefit pension and other postemployment benefit plans, retiree life insurance and medical benefits, by applying assumptions, the most significant of which include long-term rate of return on plan assets, discount rates and mortality rates.  For the long-term rate of return, we develop our assumptions regarding the expected rate of return on plan assets based on historical experience and projected long-term investment returns, and we weight the assumptions based on each plan’s asset allocation.  For the discount rate, we base our assumptions on a yield curve approach using Aa-rated corporate bonds and the expected timing of future benefit payments.  At December 31, 2023 and 2022, the funded status of our pension and other postemployment benefit plans represented an aggregate liability of $125 million and $174 million, respectively, and an aggregate asset of $31 million and $44 million, respectively.  See Note 10—Postemployment Benefit Plans.

Share-based compensation—To measure the fair values of granted or modified service-based restricted share units, we use the market price of our shares on the grant date or modification date.  To measure the fair values of granted or modified performance-based restricted share units subject to market factors, we use an average price at the performance start date and project performance based on a Monte Carlo simulation model under a risk-neutral approach and apply assumptions for the expected life, risk-free interest rate, expected volatility and dividend yield.  To measure the fair values of granted or modified performance-based restricted share units that are subject to performance targets, we use the market price of our shares on the grant date or modification date and adjust the value for the projected performance rate expected to be achieved at the end of the measurement period.  We recognize share-based compensation expense in the same financial statement line item as cash compensation paid to the respective employees or non-employee directors.  We recognize such compensation expense on a straight-line basis over the service period through the date the employee or non-employee director is no longer required to provide service to earn the award.  See Note 15—Share-Based Compensation.

Contingencies—We assess our contingencies on an ongoing basis to evaluate the appropriateness of our liabilities and disclosures for such contingencies.  We establish liabilities for estimated loss contingencies when we believe a loss is probable and the amount of the probable loss can be reasonably estimated.  Once established, we adjust the carrying amount of a contingent liability upon the occurrence of a recognizable event when facts and circumstances change, altering our previous assumptions with respect to the likelihood or amount of loss.  We recognize corresponding assets for those loss contingencies that we believe are probable of being recovered through insurance.  We recognize expense for legal costs as they are incurred, and we recognize a corresponding asset for such legal costs only if we expect such legal costs to be recovered through insurance.

Note 3—Accounting Standards Update

Recently issued accounting standards updates not yet adopted

Segment reporting—Effective no later than January 1, 2024, we will adopt the accounting standards update that requires incremental disclosures about a public entity’s reportable segments but does not change the definition or guidance for determining reportable segments.  The update, which explicitly applies to entities such as us with a single reportable segment, requires disclosure of the significant expense categories and amounts that are regularly provided to the chief operating decision-maker and included in the reported measure of segment profit or loss.  Additionally, the update requires disclosures about the individual or the group or committee identified as the chief

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operating decision-maker.  The update, which permits early adoption, is effective for annual periods beginning after December 15, 2023 and must be applied retrospectively to all periods presented, unless impracticable.  We continue to evaluate the requirements and do not expect our adoption to have a material effect on our consolidated statements of financial position, operations or cash flows or on the disclosures contained in our notes to consolidated financial statements.

Income taxes—Effective no later than January 1, 2025, we will adopt the accounting standards update that requires significant additional disclosures intended to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid.  The new guidance will be applied prospectively and permits, but does not require, retrospective application.  The update, which permits early adoption, is effective for annual periods beginning after December 15, 2024.  We continue to evaluate the requirements.  Although we expect our adoption will require us to augment certain disclosures in our notes to consolidated financial statements, we do not expect our adoption to have a material effect on our consolidated statements of financial position, operations or cash flows.

Note 4—Unconsolidated Affiliates

Equity investments

Overview—At December 31, 2023, we hold equity investments in certain unconsolidated companies, including (a) our 16 percent ownership interest in Global Sea Mineral Resources NV (together with its subsidiaries, “GSR”), a Belgian company and leading developer of nodule collection technology, which is engaged in the development and exploration of deep-sea polymetallic nodules that contain metals critical to the growing renewable energy market, (b) our 33 percent ownership interest in Orion Holdings (Cayman) Limited (together with its subsidiary, “Orion”), a Cayman Islands company that owns the harsh environment floater Transocean Norge, (c) our 19 percent ownership interest in Ocean Minerals LLC (together with its subsidiaries, “Ocean Minerals”), the parent company of Moana Minerals Ltd., a Cook Islands subsea resource development company that intends to explore and collect polymetallic nodules, (d) our 22 percent ownership interest in Nauticus Robotics, Inc., a publicly traded company that develops highly sophisticated, ultra-sustainable marine robots and intelligent software to power them, and (e) our ownership interests in other companies involved in researching and developing technology to improve efficiency, reliability, sustainability and safety for drilling and other activities.

In the years ended December 31, 2023, 2022 and 2021, we recognized a net loss of $14 million, $24 million and $10 million, respectively, recorded in other income and expense, associated with equity in losses of our equity investments.  At December 31, 2023 and 2022, the aggregate carrying amount of our equity investments was $216 million and $113 million, respectively, recorded in other assets.

Contributions—In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia, which had been cold stacked, and related assets, with an estimated fair value of $85 million (see Note 7—Long-Lived Assets), in exchange for an equity ownership interest in GSR.  We estimated the fair value of the rig using projected discounted cash flows, and our estimate required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including assumptions related to the future performance of the rig, projected demand for its services, rig availability and dayrates.  In the year ended December 31, 2022, we made an aggregate cash contribution of $42 million for partial equity ownerships in various companies, including among others, our initial investments in Liquila Ventures Ltd. (together with its subsidiaries, “Liquila”) and Ocean Minerals.

Impairments—In the years ended December 31, 2023 and 2021, we recognized a loss of $5 million and $37 million, respectively, which had no tax effect, recorded in other, net, associated with the impairment of certain equity investments upon determination that the carrying amount exceeded the estimated fair value and that the impairment was other than temporary.  For the impairment in the year ended December 31, 2021, we estimated the fair value of our investment by applying the income method using significant unobservable inputs, representative of Level 3 fair value measurements, including an assumed discount rate of 12 percent and assumptions about the future performance of the investment, such as future demand and supply for harsh environment floaters, rig utilization, revenue efficiency and dayrates.

Related party transactions

Operating activities—We engage in certain related party transactions with our unconsolidated affiliates.  Our most significant transactions with our unconsolidated affiliates are under agreements with Orion as follows: (a) we operate, stack and maintain Transocean Norge under a management services agreement, (b) we market Transocean Norge under a marketing services agreement and (c) during operations, we lease Transocean Norge under a bareboat charter agreement.  Additionally, we procure and provide services and equipment from and to other unconsolidated affiliates for technological innovation and subsea minerals exploration.

In the years ended December 31, 2023, 2022 and 2021, we incurred costs of approximately $55 million, $54 million and $24 million, respectively, for Transocean Norge, primarily for contract preparation and upgrade shipyard costs, which are reimbursable from Orion, the owner of the rig.  In the years ended December 31, 2023, 2022 and 2021, we received an aggregate cash payment of $49 million, $40 million and $16 million, respectively, for services and equipment provided to Orion.  Additionally, in the year ended December 31, 2023, we and Orion agreed to the non-cash net settlement of a balance of $25 million of accounts receivable and payable.  In the years ended December 31, 2023, 2022 and 2021, we recognized rent expense of $26 million, $11 million and $12 million, respectively, recorded in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

operating and maintenance costs, and made an aggregate cash payment of $27 million, $10 million and $15 million, respectively, to charter the rig and rent other equipment from Orion.

In the years ended December 31, 2023, 2022 and 2021, we made an aggregate cash payment of $12 million, $7 million and $6 million, respectively, to other unconsolidated affiliates for research and development and for equipment to reduce emissions and improve reliability.  At December 31, 2023 and 2022, our accounts receivable from affiliates was $14 million and $32 million, respectively, recorded in other current assets, and our accounts payable to affiliates was $4 million and $2 million, respectively, recorded in accounts payable.

Acquisition—In November 2022, we and Perestroika AS (together with its subsidiaries, “Perestroika”), an entity affiliated with one of our directors that beneficially owns approximately 11 percent of our shares, each made a cash contribution of $15 million and $10 million, respectively, to Liquila, a previously unconsolidated variable interest entity, that is constructing the ultra-deepwater floater Deepwater Aquila.  Together with a contribution from the holder of the remaining 67 percent ownership interest, these contributions were used to make the initial payment to the shipyard to acquire the newbuild drillship for a purchase price of approximately $200 million.  At December 31, 2022, the aggregate carrying amount of our investment in Liquila was $15 million, recorded in other assets.  On September 15, 2023, we issued 11.9 million Transocean Ltd. shares with an aggregate value of $99 million, which included 2.0 million Transocean Ltd. shares with an aggregate value of $16.4 million issued to Perestroika, to acquire the outstanding ownership interests in Liquila, and as a result, Liquila became our wholly owned subsidiary.  See Note 7—Long Lived Assets and Note 14—Equity.

Debt investments—We occasionally invest in debt instruments of our unconsolidated affiliates.  In June 2021, we made a cash investment of $33 million in a $100 million financing arrangement for Orion to refinance its shipyard loans.  Borrowings under the financing arrangement were secured by Transocean Norge, and outstanding borrowings incurred interest at the London Interbank Offered Rate plus a margin of 6.50 percent per annum.  At December 31, 2022, the aggregate carrying amount of our investment in the financing arrangement was $37 million, recorded in other assets.  In September 2023, we agreed to exchange the borrowings under the financing arrangement for an additional equity investment in Orion, and Orion subsequently entered into a new credit facility with another lender.  At December 31, 2023 and 2022, the aggregate principal amount due to us under the various financing arrangements with our unconsolidated affiliates was $6 million and $41 million, respectively, recorded in other assets.

Note 5—Revenues

Overview—We earn revenues primarily by performing the following activities: (i) providing our drilling rig, work crews, related equipment and services necessary to operate the rig (ii) delivering the drilling rig by mobilizing to and demobilizing from the drill location, and (iii) performing certain pre-operating activities, including rig preparation activities or equipment modifications required for the contract.  These services represent a single performance obligation under most of our drilling contracts with customers that is satisfied over time, the duration of which varies by contract.  At December 31, 2023, the drilling contract with the longest expected remaining duration, excluding unexercised options, extends through July 2029.

Disaggregation—Our contract drilling revenues, disaggregated by asset group and by country in which they were earned, were as follows (in millions):

	Year ended December 31, 2023						Year ended December 31, 2022						Year ended December 31, 2021
	Ultra-		Harsh				Ultra-		Harsh				Ultra-		Harsh
	deepwater		environment				deepwater		environment				deepwater		environment
	floaters		floaters		Total		floaters		floaters		Total		floaters		floaters		Total
U.S.	$	1,433	$	—	$	1,433	$	1,135	$	—	$	1,135	$	1,096	$	2	$	1,098
Norway		—		603		603		—		835		835		—		790		790
Brazil		298		—		298		240		—		240		237		—		237
Other countries (a)		341		157		498		333		32		365		387		44		431
Total contract drilling revenues	$	2,072	$	760	$	2,832	$	1,708	$	867	$	2,575	$	1,720	$	836	$	2,556

(a) The aggregate contract drilling revenues earned in other countries that individually represented less than 10 percent of total contract drilling revenues.

Major customers—For the year ended December 31, 2023, Shell plc (together with its affiliates, “Shell”), Equinor ASA (together with its affiliates, “Equinor”), TotalEnergies SE and Petróleo Brasileiro S.A. (together with its affiliates, “Petrobras”) represented approximately 27 percent, 16 percent, 12 percent and 11 percent, respectively, of our consolidated operating revenues.  For the year ended December 31, 2022, Shell, Equinor and Petrobras represented approximately 33 percent, 25 percent and 11 percent, respectively, of our consolidated operating revenues.  For the year ended December 31, 2021, Shell and Equinor represented approximately 31 percent and 30 percent, respectively, of our consolidated operating revenues.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Contract liabilities—Contract liabilities for our contracts with customers were as follows (in millions):

	December 31,		December 31,
	2023		2022
Deferred contract revenues, recorded in other current liabilities	$	165	$	124
Deferred contract revenues, recorded in other long-term liabilities		233		204
Total contract liabilities	$	398	$	328

Significant changes in contract liabilities were as follows (in millions):

	Years ended
	December 31,
	2023		2022
Total contract liabilities, beginning of period	$	328	$	348
Decrease due to recognition of revenues for goods and services		(189)		(119)
Increase due to goods and services transferred over time		259		99
Total contract liabilities, end of period	$	398	$	328

Pre-operating costs—In the years ended December 31, 2023, 2022 and 2021, we recognized pre-operating costs of $69 million, $47 million and $48 million, respectively, recorded in operating and maintenance costs.  At December 31, 2023 and 2022, the unrecognized pre-operating costs to obtain contracts was $221 million and $26 million, respectively, recorded in other assets, significantly increased as a result of six rigs mobilizing or preparing for contracts that commenced in the three months ended December 31, 2023, or expected to commence in the three months ending March 31, 2024.

Note 6—Contract Intangible Assets

The gross carrying amount and accumulated amortization of our drilling contract intangible assets were as follows (in millions):

	Year ended December 31, 2023						Year ended December 31, 2022
	Gross				Net		Gross				Net
	carrying		Accumulated		carrying		carrying		Accumulated		carrying
	amount		amortization		amount		amount		amortization		amount
Drilling contract intangible assets
Balance, beginning of period	$	907	$	(851)	$	56	$	907	$	(734)	$	173
Amortization		—		(52)		(52)		—		(117)		(117)
Balance, end of period	$	907	$	(903)	$	4	$	907	$	(851)	$	56

We expect to recognize the remaining $4 million balance in contract drilling revenues in the three months ending March 31, 2024.

Note 7—Long-Lived Assets

Disaggregation—The aggregate carrying amount of our long-lived assets, including our property and equipment and our right-of-use assets, disaggregated by country in which they were located, was as follows (in millions):

	December 31,
	2023		2022
Long-lived assets
U.S.	$	7,472	$	6,514
Greece		2,652		3,022
Norway		2,103		3,255
Other countries (a)		5,200		5,171
Total long-lived assets	$	17,427	$	17,962

(a) The aggregate carrying amount of long-lived assets located in other countries that individually represented less than 10 percent of total long-lived assets.

Because the majority of our assets are mobile, the geographic locations of such assets at the end of the periods are not necessarily indicative of the geographic distribution of the operating revenues generated by such assets during the periods presented.  Our international operations are subject to certain political and other uncertainties, including risks of war and civil disturbances or other market disrupting events, expropriation of equipment, repatriation of income or capital, taxation policies, and the general hazards associated with certain areas in which we operate.  Although we are organized under the laws of Switzerland, we have minimal assets located in Switzerland, and we do not conduct any operations or earn operating revenues in Switzerland.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Construction work in progress—The changes in our construction work in progress were as follows (in millions):

	Years ended December 31,
	2023		2022		2021
Construction work in progress, beginning of period	$	1,195	$	1,017	$	828
Capital expenditures
Newbuild construction program		331		669		174
Other equipment and construction projects		96		48		34
Total capital expenditures		427		717		208
Non-cash capital additions acquired in exchange for issuance of shares		126		—		—
Non-cash capital additions financed under Shipyard Loans		—		382		—
Changes in accrued capital additions		5		3		13
Property and equipment placed into service
Newbuild construction program		(1,157)		(882)		—
Other equipment and construction projects		(74)		(42)		(32)
Construction work in progress, end of period	$	522	$	1,195	$	1,017

In the years ended December 31, 2023, 2022 and 2021, we capitalized interest costs of $39 million, $73 million and $50 million, respectively, for our construction work in progress.

Acquisition—In September 2023, we acquired $126 million of property and equipment associated with Deepwater Aquila, an ultra-deepwater drillship under construction for Liquila, together with $7 million of cash and cash equivalents, and we assumed $19 million of accounts payable.  See Note 4—Unconsolidated Affiliates and Note 14—Equity.

Disposals—During the year ended December 31, 2023, in connection with our investment in a partial ownership interest in GSR, we made a non-cash contribution of the cold-stacked ultra-deepwater floater Ocean Rig Olympia and related assets.  In the year ended December 31, 2023, we recognized a loss of $169 million ($0.22 per diluted share), which had no tax effect, associated with the disposal of the rig and related assets (see Note 4—Unconsolidated Affiliates).  During the year ended December 31, 2021, in connection with our efforts to dispose of non-strategic assets, we completed the sale of the harsh environment floater Leiv Eiriksson and related assets.  In the year ended December 31, 2021, we received net cash proceeds of $4 million, and recognized an aggregate net loss of $57 million ($0.09 per diluted share), which had no tax effect, associated with the disposal of the rig and related assets.  In the years ended December 31, 2023, 2022 and 2021, we received aggregate net cash proceeds of $4 million, $7 million and $5 million, respectively and recognized an aggregate net loss of $14 million, $10 million and $5 million, respectively, associated with the disposal of assets unrelated to rig sales.

Impairment—In June 2023, we committed to the sale of the harsh environment floaters Paul B. Loyd, Jr. and Transocean Leader and related assets for expected aggregate net cash proceeds of $49 million.  In the year ended December 31, 2023, we recognized an aggregate loss of $57 million ($0.07 per diluted share), which had no tax effect, associated with the impairment of the rigs and related assets, which we determined were impaired at the time that we classified the assets as held for sale.  We measured the impairment of the rigs and related assets as the amount by which the carrying amount exceeded the estimated fair value less costs to sell.  We estimated the fair value of the assets using significant other observable inputs, representative of Level 2 fair value measurements, including a binding contract for the sale of the rigs and related assets.

Assets held for sale—At December 31, 2023, the aggregate carrying amount of our assets held for sale, including Paul B. Loyd, Jr. and Transocean Leader and related assets, was $49 million, recorded in other current assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Note 8—Leases

Overview—Our operating leases are principally for office space, storage facilities, operating equipment and land.  At December 31, 2023, our operating leases had a weighted-average discount rate of 6.7 percent and a weighted-average remaining lease term of 10.7 years.

Our finance lease for the ultra-deepwater drillship Petrobras 10000 has an implicit interest rate of 7.8 percent and requires scheduled monthly installments through the lease expiration in August 2029, after which we are obligated to acquire the drillship from the lessor for one dollar.  We recognize expense for the amortization of the right-of-use asset in depreciation and amortization.

Lease costs—The components of our lease costs were as follows (in millions):

	Years ended December 31,
Lease costs	2023		2022		2021
Short-term lease costs	$	4	$	14	$	17
Operating lease costs		14		12		12
Finance lease costs, amortization of right-of-use asset		20		20		20
Finance lease costs, interest on lease liability		27		30		33
Total lease costs	$	65	$	76	$	82

Lease payments—Supplemental cash flow information for our leases was as follows (in millions):

	Years ended December 31,
	2023		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	17	$	14	$	13
Operating cash flows from finance lease		—		8		37
Financing cash flows from finance lease		—		3		33

At December 31, 2023, the aggregate future minimum lease payments were as follows (in millions):

	Operating		Finance
	leases		lease
Years ending December 31,
2024	$	19	$	65
2025		19		70
2026		18		71
2027		15		70
2028		13		71
Thereafter		89		47
Total future minimum rental payment		173		394
Less amount representing imputed interest		(53)		(75)
Present value of future minimum rental payments		120		319
Current portion, recorded in other current liabilities		12		43
Long-term lease liabilities, recorded in other long-term liabilities	$	108	$	276

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Note 9—Debt

Overview

Outstanding debt—The aggregate principal amounts and aggregate carrying amounts, including the contractual interest payments of previously restructured debt, a bifurcated compound exchange feature, and unamortized debt-related balances, such as discounts, premiums and issue costs, were as follows (in millions):

		Principal amount				Carrying amount
		December 31,		December 31,		December 31,		December 31,
		2023		2022		2023		2022
0.50% Exchangeable Senior Bonds due January 2023	(a)	$	—	$	49	$	—	$	49
5.375% Senior Secured Notes due May 2023	(b)		—		243		—		242
5.875% Senior Secured Notes due January 2024	(b)		—		352		—		350
7.75% Senior Secured Notes due October 2024	(b)		—		240		—		238
6.25% Senior Secured Notes due December 2024	(b)		—		250		—		248
6.125% Senior Secured Notes due August 2025	(b)		—		336		—		332
7.25% Senior Notes due November 2025	(c)		354		354		352		351
4.00% Senior Guaranteed Exchangeable Bonds due December 2025	(d)		234		294		221		271
7.50% Senior Notes due January 2026	(c)		569		569		567		566
2.50% Senior Guaranteed Exchangeable Bonds due January 2027	(d)		—		238		—		265
11.50% Senior Guaranteed Notes due January 2027	(d)		687		687		938		1,008
6.875% Senior Secured Notes due February 2027	(b)		413		482		409		477
8.00% Senior Notes due February 2027	(c)		612		612		609		608
7.45% Notes due April 2027	(a)		52		52		52		52
8.00% Debentures due April 2027	(a)		22		22		22		22
4.50% Shipyard Loans due September 2027	(e)		420		439		384		389
8.375% Senior Secured Notes due February 2028	(b)		525		—		518		—
7.00% Notes due June 2028	(e)		261		261		264		264
8.00% Senior Secured Notes due September 2028	(b)		325		—		321		—
4.625% Senior Guaranteed Exchangeable Bonds due September 2029	(c)		259		300		486		440
8.75% Senior Secured Notes due February 2030	(f)		1,116		—		1,094		—
7.50% Notes due April 2031	(a)		396		396		395		394
6.80% Senior Notes due March 2038	(a)		610		610		605		605
7.35% Senior Notes due December 2041	(a)		177		177		176		176
Total debt			7,032		6,963		7,413		7,347
Less debt due within one year
0.50% Exchangeable Senior Bonds due January 2023	(a)		—		49		—		49
5.375% Senior Secured Notes due May 2023	(b)		—		243		—		242
5.875% Senior Secured Notes due January 2024	(b)		—		83		—		81
7.75% Senior Secured Notes due October 2024	(b)		—		60		—		59
6.25% Senior Secured Notes due December 2024	(b)		—		62		—		61
6.125% Senior Secured Notes due August 2025	(b)		—		66		—		64
2.50% Senior Guaranteed Exchangeable Bonds due January 2027	(d)		—		—		—		6
11.50% Senior Guaranteed Notes due January 2027	(d)		—		—		71		70
6.875% Senior Secured Notes due February 2027	(b)		83		69		81		67
4.50% Shipyard Loans due September 2027	(e)		90		20		75		20
8.00% Senior Secured Notes due September 2028	(b)		30		—		30		—
8.75% Senior Secured Notes due February 2030	(f)		117		—		113		—
Total debt due within one year			320		652		370		719
Total long-term debt		$	6,712	$	6,311	$	7,043	$	6,628

(a) Transocean Inc., a wholly owned direct subsidiary of Transocean Ltd., is the issuer of the notes and debentures (the “Legacy Guaranteed Notes”).  The Legacy Guaranteed Notes are fully and unconditionally, jointly and severally, guaranteed by Transocean Ltd.

(b) Each subsidiary issuer of the respective unregistered notes is a wholly owned indirect subsidiary of Transocean Inc.  The senior secured notes are fully and unconditionally, jointly and severally, guaranteed by Transocean Ltd., Transocean Inc. and, in each case, the owner of the respective collateral rig or rigs.

(c) Transocean Inc. is the issuer of the unregistered notes (collectively, the “Priority Guaranteed Notes”).  The guaranteed senior unsecured notes are fully and unconditionally, jointly and severally, guaranteed by Transocean Ltd. and certain wholly owned indirect subsidiaries of Transocean Inc. and rank equal in right of payment of all our existing and future unsecured unsubordinated obligations.  Such notes are structurally senior to the Legacy Guaranteed Notes, the 4.50% shipyard loans due September 2027 (each, a “Shipyard Loan”, and together, the “Shipyard Loans”) and the 7.00% notes due June 2028 and structurally subordinate to the Senior Priority Guaranteed Notes, as defined below, to the extent of the value of the assets of the subsidiaries guaranteeing the notes.

(d) Transocean Inc. is the issuer of the unregistered notes (together, the “Senior Priority Guaranteed Notes”).  The priority guaranteed senior unsecured notes are fully and unconditionally, jointly and severally, guaranteed by Transocean Ltd. and certain wholly owned indirect subsidiaries of Transocean Inc. and rank equal in right of payment of all of our existing and future unsecured unsubordinated obligations.  Such notes are structurally senior to the Priority Guaranteed Notes to the extent of the value of the assets of the subsidiaries guaranteeing the notes.

(e) The subsidiary borrowers under the Shipyard Loans and the subsidiary issuer of the registered notes are wholly owned indirect subsidiaries of Transocean Inc.  The loans and notes are fully and unconditionally guaranteed by Transocean Inc.

AR – 17

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

(f) Transocean Inc. is the issuer of the unregistered notes.  The senior secured notes are fully and unconditionally guaranteed on an unsecured basis by Transocean Ltd. and on a limited senior secured basis by each of the wholly owned subsidiary owners of the collateral rigs.

Transocean Ltd. and Transocean Inc. are not subject to any significant restrictions on their ability to obtain funds from their consolidated subsidiaries by dividends, loans or capital distributions.

Indentures—The indentures that govern our debt generally contain covenants that, among other things, limit our ability to incur certain liens on our drilling units without equally and ratably securing the notes, to engage in certain sale and lease back transactions covering any of our drilling units, to allow our subsidiaries to incur certain additional debt, or to engage in certain merger, consolidation or reorganization transactions or to enter into a scheme of arrangement qualifying as an amalgamation.

The indentures that govern the 4.00% senior guaranteed exchangeable bonds due December 2025 (the “4.00% Senior Guaranteed Exchangeable Bonds”) and the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”) require such bonds to be repurchased upon the occurrence of certain fundamental changes and events, at specified prices depending on the particular fundamental change or event, which include changes and events related to certain (i) change of control events applicable to Transocean Ltd. or Transocean Inc., (ii) the failure of our shares to be listed or quoted on a national securities exchange and (iii) specified tax matters.

The indentures that govern the 6.875% senior secured notes due February 2027, the 8.375% senior secured notes due February 2028 (the “8.375% Senior Secured Notes”) and the 8.75% senior secured notes due February 2030 (the “8.75% Senior Secured Notes”) contain covenants that limit the ability of our subsidiaries that own or operate the collateral rigs to declare or pay dividends to their affiliates.

The indentures that govern our senior secured notes contain certain lien requirements.  At December 31, 2023, we had restricted cash and cash equivalents of $198 million deposited in restricted accounts to satisfy debt service and reserve requirements for the senior secured notes.  At December 31, 2023, the rigs encumbered for the senior secured notes and our Shipyard Loans, including Deepwater Aquila, which is under construction, Deepwater Atlas, Deepwater Pontus, Deepwater Poseidon, Deepwater Proteus, Deepwater Thalassa, Deepwater Titan, Transocean Enabler and Transocean Encourage, had an aggregate carrying amount of $6.13 billion.  We will be required to redeem the senior secured notes at a price equal to 100 percent of the aggregate principal amount without a make-whole premium, upon the occurrence of certain events related to the respective collateral rigs and related drilling contracts.

Interest rate adjustments—At December 31, 2023, the interest rate in effect for the 7.35% senior notes due December 2041 was 9.35 percent, which is subject to adjustment from time to time upon a change to the credit rating of our non-credit enhanced senior unsecured long-term debt.

Scheduled maturities—At December 31, 2023, the scheduled maturities of our debt, including other installments of contractual interest payments for previously restructured debt, were as follows (in millions):

	Principal		Other		Total
	installments		installments		installments
Years ending December 31,
2024	$	320	$	71	$	391
2025		1,068		72		1,140
2026		1,110		72		1,182
2027		1,900		36		1,936
2028		664		—		664
Thereafter		1,970		—		1,970
Total installments	$	7,032	$	251		7,283
Total unamortized debt-related balances, net						(220)
Bifurcated compound exchange feature, at estimated fair value						350
Total carrying amount of debt					$	7,413

Credit agreements

Secured Credit Facility—As of December 31, 2023, we have a secured revolving credit facility established under a bank credit agreement (as amended from time to time, the “Secured Credit Facility”), which provides us with a borrowing capacity of $600 million through its scheduled maturity on June 22, 2025.  We may borrow under the Secured Credit Facility at a forward looking term rate based on the secured overnight financing rate (“Term SOFR”) plus a margin (the “Secured Credit Facility Margin”) and a Term SOFR spread adjustment of 0.10 percent.  The Secured Credit Facility is subject to permitted extensions and certain early maturity triggers, including if on any date the aggregate amount of scheduled principal repayments of indebtedness, with certain exceptions, due within 91 days thereof is equal to or in excess of $200 million and available cash is less than $250 million.  The Secured Credit Facility permits us to increase the aggregate amount of commitments by up to $250 million.  The Secured Credit Facility is guaranteed by Transocean Ltd. and certain wholly owned subsidiaries.  The Secured Credit Facility is secured by, among other things, a lien on the ultra-deepwater floaters Deepwater Asgard, Deepwater Corcovado, Deepwater Invictus, Deepwater Mykonos, Deepwater Orion, Deepwater Skyros, Development Driller III,

AR – 18

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Dhirubhai Deepwater KG2 and Discoverer Inspiration and the harsh environment floaters Transocean Barents and Transocean Spitsbergen, and at December 31, 2023, the aggregate carrying amount of which was $4.71 billion.

The Secured Credit Facility contains covenants that, among other things, include maintenance of a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0, a maximum debt to capitalization ratio of 0.60 to 1.00 and minimum liquidity of $500 million.  The Secured Credit Facility also restricts the ability of Transocean Ltd. and certain of our subsidiaries to, among other things, merge, consolidate or otherwise make changes to the corporate structure, incur liens, incur additional indebtedness, enter into transactions with affiliates and pay dividends and other distributions.  In order to utilize the Secured Credit Facility, we must, at the time of the borrowing request, be in full compliance with the terms and conditions of the Secured Credit Facility and make certain representations and warranties, including with respect to compliance with laws and solvency, to the lenders.  Repayment of borrowings under the Secured Credit Facility are subject to acceleration upon the occurrence of an event of default.  Under the agreements governing certain of our debt and finance lease, we are also subject to various covenants, including restrictions on creating liens, engaging in sale/leaseback transactions and engaging in certain merger, consolidation or reorganization transactions.  A default under our public debt indentures, the agreements governing our senior secured notes, our finance lease contract or any other debt owed to unaffiliated entities that exceeds $125 million could trigger a default under the Secured Credit Facility and, if not waived by the lenders, could cause us to lose access to the Secured Credit Facility.  At December 31, 2023, based on the credit rating of the Secured Credit Facility on that date, the Secured Credit Facility Margin was 2.875 percent and the facility fee was 0.625 percent.  At December 31, 2023, we had no borrowings outstanding, $13 million of letters of credit issued, and we had $587 million of available borrowing capacity under the Secured Credit Facility.

Shipyard financing arrangement—We have credit agreements that established the Shipyard Loans to finance all or a portion of the final payments owed to the shipyard upon delivery of the ultra-deepwater floaters Deepwater Atlas and Deepwater Titan.  Borrowings under the Shipyard Loan for Deepwater Atlas are secured by, among other security, a lien on the rig, and borrowings under the Shipyard Loan for Deepwater Titan are unsecured.  We have the right to prepay outstanding borrowings, in full or in part, without penalty.  The Shipyard Loans contain covenants that, among other things, limit the ability of the subsidiary owners of the drilling rigs to incur certain types of additional indebtedness or make certain additional commitments or investments.  In June 2022, we borrowed $349 million under the Shipyard Loan for Deepwater Atlas and made a cash payment of $46 million to satisfy the final milestone payment due upon delivery of the rig.  In December 2022, we borrowed $90 million under the Shipyard Loan for Deepwater Titan and made a cash payment of $325 million to satisfy the final milestone payment due upon delivery of the rig.  We recorded each Shipyard Loan, net of imputed interest, with an initial carrying amount of $300 million and $82 million, respectively, and corresponding non-cash capital additions, recorded in property and equipment.  The carrying amount of each Shipyard Loan at inception represented its estimated fair value using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt, by applying an estimated discount rate of 9.4 percent and 7.6 percent, respectively.

Exchangeable bonds

Exchange terms—At December 31, 2023, the (a) current exchange rates, expressed as the number of Transocean Ltd. shares per $1,000 note, (b) implied exchange prices per Transocean Ltd. share and (c) aggregate shares, expressed in millions, issuable upon exchange of our exchangeable bonds were as follows:

			Implied
	Exchange		exchange		Shares
	rate		price		issuable
4.00% Senior Guaranteed Exchangeable Bonds due December 2025		190.4762	$	5.25		44.5
4.625% Senior Guaranteed Exchangeable Bonds due September 2029		290.6618	$	3.44		75.3

The exchange rates, identified above, are subject to adjustment upon the occurrence of certain events.  The 4.00% Senior Guaranteed Exchangeable Bonds may be exchanged by holders at any time prior to the close of business on the second business day immediately preceding the maturity date and, at our election, such exchange may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares.  The 4.625% Senior Guaranteed Exchangeable Bonds may be exchanged by holders at any time prior to the close of business on the second business day immediately preceding the maturity date or redemption date and, at our election, such exchange may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares.

Effective interest rates and fair values—At December 31, 2023, the effective interest rates and estimated fair values of our exchangeable bonds were as follows (in millions, except effective interest rates):

	Effective		Fair
	interest rate		value
4.00% Senior Guaranteed Exchangeable Bonds due December 2025		6.9%	$	341
4.625% Senior Guaranteed Exchangeable Bonds due September 2029		18.3%	$	567

We estimated the fair values of the exchangeable debt instruments, including the exchange features, by employing a binomial lattice model using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt and the expected volatility of the market price for our shares.

AR – 19

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Interest expense—We recognized interest expense for our exchangeable bonds as follows (in millions):

		Years ended December 31,
	2023		2022		2021
Contractual interest	$	24	$	16	$	11
Amortization		19		9		5
Bifurcated compound exchange feature		127		157		—
Total	$	170	$	182	$	16

The 4.625% Senior Guaranteed Exchangeable Bonds contain a compound exchange feature that, in addition to the exchange terms outlined above, requires us to pay holders a make whole premium of future interest through March 30, 2028, for exchanges exercised during a redemption notice period.  Such compound exchange feature must be bifurcated from the host debt instrument since it is not considered indexed to our stock.  Accordingly, we recognize changes to the liability for the estimated fair value of the bifurcated compound exchange feature with a corresponding adjustment to interest expense.  At December 31, 2023 and 2022, the carrying amount of the bifurcated compound exchange feature, recorded as a component of the carrying amount of debt, was $350 million and $295 million, respectively.

Exchanges—In April 2023, Perestroika exchanged $213 million aggregate principal amount of the 2.50% senior guaranteed exchangeable bonds due January 2027 (the “2.50% Senior Guaranteed Exchangeable Bonds”) under the terms of the governing indenture at the applicable exchange rate of 162.1626 Transocean Ltd. shares per $1,000 note.  As part of the transaction governing the exchange, we delivered 34.6 million Transocean Ltd. shares and additional immaterial cash consideration to such exchanging holder.  The director’s beneficial ownership of our shares resulting from these transactions did not change.

In July 2023, the holders of the remaining outstanding $25 million aggregate principal amount of 2.50% Senior Guaranteed Exchangeable Bonds exchanged such bonds under the terms of the governing indenture at the applicable exchange rate of 162.1626 Transocean Ltd. shares per $1,000 note.  As part of the transaction, we delivered 4.0 million Transocean Ltd. shares.

In October 2023, holders of $60 million and $41 million aggregate principal amount of the 4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds, respectively, exchanged such bonds under the terms of the governing indenture at the applicable exchange rate of 190.4762 and 290.6618 Transocean Ltd. shares, respectively, per $1,000 note.  As part of the transactions, we delivered an aggregate 26.5 million Transocean Ltd. shares, including an aggregate 3.1 million additional shares to such holders.

Debt issuance

Senior secured notes—In January 2023, we issued $525 million aggregate principal amount of 8.375% Senior Secured Notes, and we received $516 million aggregate cash proceeds, net of issue costs.  The 8.375% Senior Secured Notes are secured by the assets and earnings associated with the ultra-deepwater floater Deepwater Titan and the equity of the wholly owned subsidiary that owns or operates the collateral rig.  Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements.  We may redeem all or a portion of the 8.375% Senior Secured Notes on or prior to February 1, 2025 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

In January 2023, we issued $1.175 billion aggregate principal amount of 8.75% Senior Secured Notes, and we received $1.148 billion aggregate cash proceeds, net of issue costs.  The 8.75% Senior Secured Notes are secured by a lien on the ultra-deepwater floaters Deepwater Pontus, Deepwater Proteus and Deepwater Thalassa and the harsh environment floaters Transocean Enabler and Transocean Encourage, together with certain related assets.  Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements.  We may redeem all or a portion of the 8.75% Senior Secured Notes on or prior to February 15, 2026 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

In October 2023, we issued $325 million aggregate principal amount of 8.00% senior secured notes due September 2028 (the “8.00% Senior Secured Notes”), and we received $319 million aggregate cash proceeds, net of issue costs.  The 8.00% Senior Secured Notes are secured by the assets and certain earnings associated with the ultra-deepwater floater Deepwater Aquila as well as the equity of certain of the wholly owned subsidiaries that own or operate the collateral rig.  Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements.  We may redeem all or a portion of the 8.00% Senior Secured Notes on or prior to September 30, 2025 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

Senior guaranteed exchangeable bonds—In September 2022, we issued $300 million aggregate principal amount of 4.625% Senior Guaranteed Exchangeable Bonds in connection with exchange and purchase agreements.  Pursuant to the exchange and purchase agreements, we exchanged (the “2022 Private Exchange”) (a) $73 million aggregate principal amount of the 0.50% exchangeable senior bonds due January 2023 (the “0.50% Exchangeable Senior Bonds”) for (i) $73 million aggregate principal amount of 4.625% Senior Guaranteed Exchangeable Bonds and (ii) 6.7 million warrants to purchase Transocean Ltd. shares, and (b) $43 million aggregate principal amount of the 7.25% senior notes due November 2025 for $39 million aggregate principal amount of the 4.625% Senior Guaranteed

AR – 20

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Exchangeable Bonds.  In the year ended December 31, 2022, as a result of the 2022 Private Exchange, we recognized a gain of $6 million ($0.01 per diluted share), with no tax effect, associated with the retirement of debt.  Additionally, we sold $188 million aggregate principal amount of the 4.625% Senior Guaranteed Exchangeable Bonds and issued 15.5 million warrants to purchase Transocean Ltd. shares for aggregate net cash proceeds of $188 million.  On or after March 30, 2026, we may redeem for cash all or a portion of the 4.625% Senior Guaranteed Exchangeable Bonds at a price equivalent to the aggregate principal amount to be redeemed if the closing price of our shares has been greater than 115 percent of the exchange price for a period of at least 20 trading days.  The initial carrying amount of the 4.625% Senior Guaranteed Exchangeable Bonds, measured at the estimated fair value on the date of issuance, was $281 million.  We estimated the fair value of the exchangeable debt instrument, including the exchange feature, by employing a binomial lattice model and by using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt and expected volatility of the market price for our shares.  See Note 14—Equity.

In February 2021, we issued $294 million aggregate principal amount of the 4.00% Senior Guaranteed Exchangeable Bonds and made an aggregate cash payment of $11 million in private exchanges (the “2021 Private Exchange”) for $323 million aggregate principal amount of the 0.50% Exchangeable Senior Bonds.  In the year ended December 31, 2021, as a result of the 2021 Private Exchange, we recognized a gain of $51 million ($0.08 per diluted share), with no tax effect, associated with the retirement of debt.  The initial carrying amount of the 4.00% Senior Guaranteed Exchangeable Bonds, measured at the estimated fair value on the date of issuance, was $260 million.  We estimated the fair value of the exchangeable debt instrument, including the exchange feature, by employing a binomial lattice model using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt and expected volatility of the market price for our shares.

Debt repayment, redemption, and retirement

Early retirement—During the three years ended December 31, 2023, we retired certain notes as a result of redemptions or private exchanges.  The aggregate principal amounts, cash payments and recognized gain or loss for such transactions were as follows (in millions):

	Years ended December 31,
	2023		2022						2021
	Redeemed		Redeemed		Exchanged		Total		Redeemed		Exchanged		Total
5.52% Senior Secured Notes due May 2022	$	—	$	18	$	—	$	18	$	—	$	—	$	—
3.80% Senior Notes due October 2022		—		27		—		27		—		—		—
0.50% Exchangeable Senior Bonds due January 2023		—		18		73		91		—		323		323
5.375% Senior Secured Notes due May 2023		243		—		—		—		11		—		11
5.875% Senior Secured Notes due January 2024		311		—		—		—		68		—		68
7.75% Senior Secured Notes due October 2024		240		—		—		—		—		—		—
6.25% Senior Secured Notes due December 2024		250		—		—		—		—		—		—
6.125% Senior Secured Notes due August 2025		336		—		—		—		—		—		—
7.25% Senior Notes due November 2025		—		14		43		57		—		—		—
Aggregate principal amount of debt retired	$	1,380	$	77	$	116	$	193	$	79	$	323	$	402
Aggregate cash payment	$	1,402	$	75	$	—	$	75	$	79	$	11	$	90
Aggregate principal amount of debt issued in exchanges	$	—	$	—	$	112	$	112	$	—	$	294	$	294
Aggregate fair value of warrants issued in exchanges	$	—	$	—	$	5	$	5	$	—	$	—	$	—
Aggregate net gain (loss)	$	(32)	$	2	$	6	$	8	$	—	$	51	$	51

Additionally, in the year ended December 31, 2023, we recognized a net gain of $1 million associated with the retirement of $41 million aggregate principal amount of the 4.625% Senior Guaranteed Exchangeable Bonds exchanged by holders in October 2023.

Scheduled maturities and installments—On the scheduled maturity date of January 30, 2023, we made a cash payment of $49 million to repay an equivalent aggregate principal amount of the outstanding 0.50% Exchangeable Senior Bonds.  On the scheduled maturity date of December 15, 2021, we made a cash payment of $38 million to repay an equivalent aggregate principal amount of the outstanding 6.375% senior notes due December 2021.  In the years ended December 31, 2023, 2022 and 2021, we made an aggregate cash payment of $262 million, $479 million and $478 million, respectively, to repay other indebtedness in scheduled installments.

Note 10—Postemployment Benefit Plans

Defined contribution plans

We sponsor defined contribution plans for our employees in most markets in which we operate worldwide, the most significant of which were as follows: (1) a qualified savings plan covering certain eligible employees working in the U.S., (2) various savings plans covering eligible employees working in Norway, (3) a non-qualified savings plan covering certain eligible employees working outside the U.S., the United Kingdom (“U.K.”) and Norway and (4) a qualified savings plan covering certain eligible employees working in the U.K.  In the years ended December 31, 2023, 2022 and 2021, we recognized expense of $58 million, $61 million and $52 million, respectively, recorded in the same financial statement line item as cash compensation paid to the respective employees, related to our defined contribution plans.

AR – 21

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Defined benefit pension and other postemployment benefit plans

Overview—As of December 31, 2023, we had defined benefit plans in the U.S., including three funded and three unfunded defined benefit plans (the “U.S. Plans”), and in the U.K., we had one funded defined benefit plan (the “U.K. Plan”).  During the year ended December 31, 2021, as required by local authorities, we terminated our remaining plans in Norway (together with the U.K. Plan, the “Non-U.S. Plans”).  We also maintain certain unfunded other postemployment benefit plans (collectively, the “OPEB Plans”), under which benefits to eligible participants diminish during a phase-out period ending December 31, 2025.  We maintain the benefit obligations under our defined benefit plans until they are fully satisfied.

Net periodic benefit costs—We estimated our net periodic benefit costs using the following weighted average assumptions:

	Year ended December 31, 2023						Year ended December 31, 2022						Year ended December 31, 2021
	U.S.		U.K.		OPEB		U.S.		U.K.		OPEB		U.S.		Non-U.S.		OPEB
	Plans		Plan		Plans		Plans		Plan		Plans		Plans		Plans		Plans
Discount rate	5.06	%	4.80	%	4.92	%	2.92	%	1.90	%	1.83	%	2.60	%	1.50	%	1.21	%
Expected rate of return	6.41	%	5.00	%	na		4.81	%	2.00	%	na		5.51	%	3.20	%	na

“na” means not applicable.

The components of net periodic benefit costs, recognized in other income and expense, were as follows (in millions):

	Year ended December 31, 2023								Year ended December 31, 2022								Year ended December 31, 2021
	U.S.		U.K.		OPEB				U.S.		U.K.		OPEB				U.S.		Non-U.S.		OPEB
	Plans		Plan		Plans		Total		Plans		Plan		Plans		Total		Plans		Plans		Plans		Total
Net periodic benefit costs
Interest cost	$	65	$	9	$	—	$	74	$	50	$	6	$	—	$	56	$	47	$	6	$	—	$	53
Expected return on plan assets		(84)		(11)		—		(95)		(65)		(7)		—		(72)		(66)		(13)		—		(79)
Settlements and curtailments		—		—		—		—		—		—		—		—		—		(2)		—		(2)
Actuarial loss, net		—		2		—		2		5		—		—		5		11		1		—		12
Prior service gain, net		—		—		(2)		(2)		—		—		(2)		(2)		—		—		(2)		(2)
Net periodic benefit costs (income)	$	(19)	$	—	$	(2)	$	(21)	$	(10)	$	(1)	$	(2)	$	(13)	$	(8)	$	(8)	$	(2)	$	(18)

Funded status—We estimated our benefit obligations using the following weighted-average assumptions:

	December 31, 2023						December 31, 2022
	U.S.		U.K.		OPEB		U.S.		U.K.		OPEB
	Plans		Plan		Plans		Plans		Plan		Plans
Discount rate	4.88	%	4.50	%	4.80	%	5.06	%	4.80	%	4.92	%
Expected long-term rate of return	6.80	%	5.10	%	na		6.41	%	5.00	%	na

“na” means not applicable.

The changes in funded status, balance sheet classifications and accumulated benefit obligations were as follows (in millions):

	Year ended December 31, 2023								Year ended December 31, 2022
	U.S.		U.K.		OPEB				U.S.		U.K.		OPEB
	Plans		Plan		Plans		Total		Plans		Plan		Plans		Total
Change in projected benefit obligation
Projected benefit obligation, beginning of period	$	1,307	$	188	$	10	$	1,505	$	1,724	$	348	$	13	$	2,085
Actuarial (gain) loss, net		32		11		—		43		(391)		(119)		(1)		(511)
Interest cost		65		9		—		74		50		6		—		56
Currency exchange rate (gain) loss		—		11		—		11		—		(37)		—		(37)
Benefits paid		(76)		(11)		(2)		(89)		(76)		(10)		(2)		(88)
Projected benefit obligation, end of period		1,328		208		8		1,544		1,307		188		10		1,505
Change in plan assets
Fair value of plan assets, beginning of period		1,143		232		—		1,375		1,621		434		—		2,055
Actual return (loss) on plan assets		138		6		—		144		(403)		(147)		—		(550)
Currency exchange rate gain (loss)		—		12		—		12		—		(45)		—		(45)
Employer contributions		6		—		2		8		1		—		2		3
Benefits paid		(76)		(11)		(2)		(89)		(76)		(10)		(2)		(88)
Fair value of plan assets, end of period		1,211		239		—		1,450		1,143		232		—		1,375
Funded status asset (liability), end of period	$	(117)	$	31	$	(8)	$	(94)	$	(164)	$	44	$	(10)	$	(130)
Balance sheet classification, end of period:
Pension asset, non-current	$	—	$	31	$	—	$	31	$	—	$	44	$	—	$	44
Pension liability, current		(1)		—		(3)		(4)		(1)		—		(3)		(4)
Pension liability, non-current		(116)		—		(5)		(121)		(163)		—		(7)		(170)
Accumulated other comprehensive loss (income), before taxes		144		90		(6)		228		166		76		(8)		234
Accumulated benefit obligation, end of period	$	1,328	$	208	$	8	$	1,544	$	1,307	$	188	$	10	$	1,505

AR – 22

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Because our defined benefit plans no longer accrue benefits for participants, the projected benefit obligation is equivalent to the accumulated benefit obligation.  Certain amounts related to plans with a projected benefit obligation and accumulated benefit obligation in excess of plan assets were as follows (in millions):

	December 31, 2023								December 31, 2022
	U.S.		U.K.		OPEB				U.S.		U.K.		OPEB
	Plans		Plan		Plans		Total		Plans		Plan		Plans		Total
Projected benefit obligation / accumulated benefit obligation	$	1,328	$	—	$	8	$	1,336	$	1,307	$	—	$	10	$	1,317
Fair value of plan assets		1,211		—		—		1,211		1,143		—		—		1,143

The amounts in accumulated other comprehensive loss (income) that have not been recognized were as follows (in millions):

	December 31, 2023								December 31, 2022
	U.S.		U.K.		OPEB				U.S.		U.K.		OPEB
	Plans		Plan		Plans		Total		Plans		Plan		Plans		Total
Actuarial (gain) loss, net	$	144	$	88	$	(1)	$	231	$	166	$	74	$	(1)	$	239
Prior service cost (credit), net		—		2		(5)		(3)		—		2		(7)		(5)
Accumulated other comprehensive loss (income), before taxes	$	144	$	90	$	(6)	$	228	$	166	$	76	$	(8)	$	234

Plan assets—The weighted-average target and actual allocations of assets for the funded defined benefit plans were as follows:

	December 31, 2023								December 31, 2022
	Target allocation				Actual allocation				Target allocation				Actual allocation
	U.S.		U.K.		U.S.		U.K.		U.S.		U.K.		U.S.		U.K.
	Plans		Plan		Plans		Plan		Plans		Plan		Plans		Plan
Equity securities	38	%	20	%	37	%	21	%	38	%	20	%	38	%	24	%
Fixed income securities	62	%	73	%	62	%	72	%	62	%	80	%	61	%	74	%
Other investments	—	%	7	%	1	%	7	%	—		—	%	1		2	%
Total	100	%	100	%	100	%	100	%	100	%	100	%	100	%	100	%

We periodically review our investment policies, plan assets and asset allocation strategies to evaluate performance relative to specified objectives.  In determining our asset allocation strategies for the U.S. Plans, we review the results of regression models to assess the most appropriate target allocation for each plan, given the plan’s status, demographics and duration.  For the U.K. Plan, the plan trustees establish the asset allocation strategies consistent with the regulations of the U.K. pension regulators and in consultation with financial advisors and company representatives.  Investment managers for the U.S. Plans and the U.K. Plan are given established ranges within which the investments may deviate from the target allocations.

The investments for the funded defined benefit plans were categorized as follows (in millions):

	December 31, 2023
	Significant observable inputs						Significant other observable inputs						Total
	U.S.		U.K.				U.S.		U.K.				U.S.		U.K.
	Plans		Plan		Total		Plans		Plan		Total		Plans		Plan		Total
Mutual funds
U.S. equity funds	$	316	$	—	$	316	$	—	$	—	$	—	$	316	$	—	$	316
Non-U.S. equity funds		139		—		139		—		51		51		139		51		190
Bond funds		746		—		746		4		171		175		750		171		921
Total mutual funds		1,201		—		1,201		4		222		226		1,205		222		1,427
Other investments
Cash and money market funds		6		1		7		—		—		—		6		1		7
Synthetic leveraged credit fund		—		—		—		—		16		16		—		16		16
Total other investments		6		1		7		—		16		16		6		17		23
Total investments	$	1,207	$	1	$	1,208	$	4	$	238	$	242	$	1,211	$	239	$	1,450

	December 31, 2022
	Significant observable inputs						Significant other observable inputs						Total
	U.S.		U.K.				U.S.		U.K.				U.S.		U.K.
	Plans		Plan		Total		Plans		Plan		Total		Plans		Plan		Total
Mutual funds
U.S. equity funds	$	301	$	—	$	301	$	—	$	—	$	—	$	301	$	—	$	301
Non-U.S. equity funds		132		—		132		4		57		61		136		57		193
Bond funds		698		—		698		2		171		173		700		171		871
Total mutual funds		1,131		—		1,131		6		228		234		1,137		228		1,365
Other investments
Cash and money market funds		6		4		10		—		—		—		6		4		10
Total investments	$	1,137	$	4	$	1,141	$	6	$	228	$	234	$	1,143	$	232	$	1,375

AR – 23

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

We estimated the fair values of the plan assets by applying the market approach, as categorized above, using either (i) significant observable inputs, representative of Level 1 fair value measurements, including market prices of actively traded funds, or (ii) significant other observable inputs, representative of Level 2 fair value measurements, including market prices of the underlying securities in the trust funds.  The U.S. Plans and the U.K. Plan invest in passively and actively managed funds that are referenced to or benchmarked against market indices.  The plan investment managers have discretion to select securities within each asset category.  Given this discretion, the plans may occasionally hold either long or short positions in our debt or equity securities.  Since plan investment managers are required to maintain well diversified portfolios, the actual investment in our securities would be immaterial relative to asset categories and the overall plan assets.

Funding contributions and benefit payments—In the years ended December 31, 2023, 2022 and 2021, we made an aggregate contribution of $8 million, $3 million and $10 million, respectively, to the defined benefit pension plans and the OPEB Plans using our cash flows from operations.  In the year ending December 31, 2024, we expect to make an aggregate contribution of $4 million, including $1 million and $3 million to the defined benefit pension plans and the OPEB Plans, respectively.

The projected benefits payments were as follows (in millions):

	U.S.		U.K.		OPEB
	Plans		Plan		Plans		Total
Years ending December 31,
2024	$	84	$	6	$	3	$	93
2025		84		7		3		94
2026		84		8		1		93
2027		85		8		—		93
2028		85		9		—		94
2029 - 2033		427		58		1		486

Note 11—Income Taxes

Overview—Transocean Ltd., a holding company and Swiss resident, is subject to Swiss federal, cantonal and communal income tax.  For Swiss income taxes, however, qualifying net dividend income and net capital gains on the sale of qualifying investments in subsidiaries are exempt from taxation.  Consequently, there is not a direct relationship between our Swiss earnings before income taxes and our Swiss income tax expense.

Tax provision and rate—The components of our income tax provision (benefit) were as follows (in millions):

	Years ended December 31,
	2023		2022		2021
Current tax expense (benefit)	$	(5)	$	13	$	(7)
Deferred tax expense		18		46		128
Income tax expense	$	13	$	59	$	121

In the years ended December 31, 2023, 2022 and 2021, our effective tax rate was (1.4) percent, (10.4) percent and (25.7) percent, respectively, based on loss before income tax expense.  The relationship between our provision for or benefit from income taxes and our income or loss before income taxes can vary significantly from period to period considering, among other factors, (a) the overall level of income before income taxes, (b) changes in the blend of income that is taxed based on gross revenues rather than income before taxes, (c) rig movements between taxing jurisdictions and (d) our rig operating structures.

A reconciliation of the income tax benefit computed at the Swiss holding company federal statutory rate of 7.83% and our reported consolidated income tax expense was as follows (in millions):

	Years ended December 31,
	2023		2022		2021
Income tax benefit at Swiss federal statutory rate	$	(74)	$	(44)	$	(36)
Earnings subject to rates different than the Swiss federal statutory rate		129		52		78
Deemed profits taxes		11		10		17
Withholding taxes		5		12		10
Changes in valuation allowance		(23)		79		1,167
Changes in unrecognized tax benefits, net		(37)		2		(43)
Swiss Federal Act on Tax Reform and AHV Financing		—		96		(1,095)
Audit settlement		—		12		—
Changes due to organizational restructuring		—		(162)		16
Losses on impairment		—		—		5
Other, net		2		2		2
Income tax expense	$	13	$	59	$	121

In January 2020, Switzerland made effective the Federal Act on Tax Reform and AHV Financing (“TRAF”).  In March 2020, we entered into discussions with the Swiss tax authorities regarding the manner by which the TRAF applies to certain Swiss subsidiaries, which

AR – 24

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

allows us to access historic depreciation and costs related to financing assets not previously deducted on Swiss tax returns, which can be apportioned to offset taxable income based on the remaining useful lives of the rigs and financing assets.  In the three months ended December 31, 2021, we reached an agreement with the Swiss Tax authorities regarding the TRAF treatment.  At December 31, 2023 and 2022, we had a deferred tax liability of $264 million and $226 million, respectively, and a deferred tax asset of $1.21 billion and $1.23 billion, respectively, offset with a valuation allowance of $1.10 billion, associated with TRAF.

Deferred taxes—The significant components of our deferred tax assets and liabilities were as follows (in millions):

	December 31,
	2023		2022
Deferred tax assets
Swiss historic depreciation and financing asset costs	$	1,210	$	1,226
Net operating loss carryforwards		1,264		1,115
Interest expense limitation		87		77
United Kingdom charter limitation		53		53
Accrued expenses		47		36
Tax credits		4		11
Deferred income		—		7
Accrued payroll costs not currently deductible		16		18
Loss contingencies		4		4
Other		54		43
Valuation allowance		(1,884)		(1,910)
Total deferred tax assets, net of allowance		855		680
Deferred tax liabilities
Depreciation		(1,342)		(1,150)
Other		(9)		(10)
Total deferred tax liabilities		(1,351)		(1,160)
Deferred tax assets (liabilities), net	$	(496)	$	(480)

We include taxes related to the earnings of all of our subsidiaries since we do not consider the earnings of any of our subsidiaries to be indefinitely reinvested.

At December 31, 2023 and 2022, our deferred tax assets included U.S. tax credits of $4 million and $11 million, respectively, which will expire between 2024 and 2026.  Deferred tax assets related to our net operating losses were generated in various worldwide tax jurisdictions.  At December 31, 2023, our net deferred tax assets related to our net operating loss carryforwards included $585 million, which do not expire, and $855 million, which will expire between 2024 and 2041.

As of December 31, 2023, our consolidated cumulative loss incurred over the recent three-year period represented significant objective negative evidence for the evaluation of the realizability of our deferred tax assets.  Because such evidence has limited our ability to consider other subjective evidence, we evaluate each jurisdiction separately.  We consider objective evidence, such as contract backlog activity, in jurisdictions in which we have profitable contracts, and the ability to carryback losses or utilize losses against potential exposures.  If estimated future taxable income changes during the carryforward periods or if the cumulative loss is no longer present, we may adjust the amount of deferred tax assets that we expect to realize.  At December 31, 2023 and 2022, due to uncertainty of realization, we had a valuation allowance of $1.88 billion and $1.91 billion, respectively, on net operating losses and other deferred tax assets due to the uncertainty of realization.

Unrecognized tax benefits—The changes to unrecognized tax benefits, excluding interest and penalties that we recognize as a component of income tax expense, were as follows (in millions):

	Years ended December 31,
		2023		2022		2021
Balance, beginning of period	$	444	$	402	$	378
Additions for current year tax positions		45		28		28
Additions for prior year tax positions		5		62		46
Reductions related to statute of limitation expirations and changes in law		(14)		(13)		(19)
Reductions due to settlements		(5)		(5)		(31)
Reductions for prior year tax positions		(26)		(30)		—
Balance, end of period	$	449	$	444	$	402

AR – 25

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Our unrecognized tax benefits, including related interest and penalties that we recognize as a component of income tax expense, were as follows (in millions):

	December 31,
		2023		2022
Unrecognized tax benefits, excluding interest and penalties	$	449	$	444
Interest and penalties		9		27
Unrecognized tax benefits, including interest and penalties	$	458	$	471

In the years ended December 31, 2023, 2022 and 2021, we recognized, as a component of our income tax provision, benefit of $18 million, expense of $6 million and expense of $8 million, respectively, related to interest and penalties associated with our unrecognized tax benefits.  As of December 31, 2023, we have unrecognized benefits of $458 million, including interest and penalties, against which we have recorded net operating loss deferred tax assets of $411 million, resulting in net unrecognized tax benefits of $47 million, including interest and penalties, that upon reversal would favorably impact our effective tax rate.  During the year ending December 31, 2024, it is reasonably possible that our existing liabilities for unrecognized tax benefits may increase or decrease, primarily due to the progression of open audits and the expiration of statutes of limitation.  However, we cannot reasonably estimate a range of potential changes in our existing liabilities for unrecognized tax benefits due to various uncertainties, such as the unresolved nature of various audits.

Tax positions and returns—We conduct operations through our various subsidiaries in countries throughout the world.  Each country has its own tax regimes with varying nominal rates, deductions and tax attributes that are subject to changes resulting from new legislation, interpretation or guidance.  From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to adjust our recorded tax assets and liabilities.  Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments.  We intend to defend our tax positions vigorously.  Although we can provide no assurance as to the outcome of the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our consolidated statement of financial position or results of operations; however, it could have a material adverse effect on our consolidated statement of cash flows.

Brazil tax investigations—In December 2005, the Brazilian tax authorities began issuing tax assessments with respect to our tax returns for the years 2000 through 2004.  In May 2014, the Brazilian tax authorities issued an additional tax assessment for the years 2009 and 2010.  We filed protests with the Brazilian tax authorities for the assessments and are engaged in the appeals process, and a portion of two cases were favorably closed.  As of December 31, 2023, the remaining aggregate tax assessment, including interest and penalties, was for corporate income tax of BRL 698 million, equivalent to approximately $144 million, and indirect tax of BRL 90 million, equivalent to $19 million.  We believe our returns are materially correct as filed, and we are vigorously contesting these assessments.  An unfavorable outcome on these proposed assessments could have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Note 12—Loss Per Share

The computation of basic and diluted loss per share was as follows (in millions, except per share data):

	Years ended December 31,
	2023		2022		2021
Numerator for loss per share, basic and diluted
Net loss attributable to controlling interest	$	(954)	$	(621)	$	(592)
Denominator for loss per share, basic and diluted
Weighted-average shares for per share calculation		768		699		637
Loss per share, basic and diluted	$	(1.24)	$	(0.89)	$	(0.93)

We excluded from the computations certain shares issuable as follows because the effect would have been antidilutive (in millions):

	Years ended December 31,
	2023		2022		2021
Exchangeable bonds		150.8		128.1		104.4
Share-based awards		18.6		15.5		12.6
Warrants		10.2		—		—

Note 13—Commitments and Contingencies

Purchase and service agreement obligations

We have purchase obligations with shipyards and other contractors primarily related to our newbuild construction program for Deepwater Aquila.  We also have long-term service agreements with original equipment manufacturers to provide services and parts, primarily related to our pressure control systems and drilling systems.  The commitments for our service agreements were estimated based

AR – 26

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

on projected operating activity, and actual operating activity could differ from such estimates.  At December 31, 2023, the aggregate future payments required under our purchase obligations and our service agreement obligations were as follows (in millions):

			Service
	Purchase		agreement
	obligations		obligations
Years ending December 31,
2024	$	19	$	131
2025		2		145
2026		—		149
2027		—		121
2028		—		73
Thereafter		—		109
Total	$	21	$	728

Letters of credit and surety bonds

At December 31, 2023 and 2022, we had outstanding letters of credit totaling $16 million and $8 million, respectively, issued under various committed and uncommitted credit lines provided by banks to guarantee various contract bidding, performance activities and customs obligations.  At December 31, 2023 and 2022, we also had outstanding surety bonds totaling $198 million and $161 million, respectively, to secure customs obligations related to the importation of our rigs and certain performance and other obligations.  At December 31, 2023 and 2022, the aggregate cash collateral held by institutions to secure our letters of credit and surety bonds was $7 million.

Legal proceedings

Asbestos litigation—In 2014, several of our subsidiaries were named, along with numerous other unaffiliated defendants, in complaints filed in Louisiana.  The plaintiffs, former employees of some of the defendants, generally allege that the defendants used or manufactured asbestos-containing drilling mud additives for use in connection with drilling operations, claiming negligence, products liability, strict liability and claims allowed under the Jones Act and general maritime law.  One of our subsidiaries has been named in similar complaints filed in Illinois, Missouri and California.  At December 31, 2023, seven plaintiffs have claims pending in Louisiana and 15 plaintiffs in the aggregate have claims pending in either Illinois, Missouri, or California, in which we have or may have an interest.  We intend to defend these lawsuits vigorously, although we can provide no assurance as to the outcome.  We historically have maintained broad liability insurance, although we can provide no assurance as to whether insurance will cover the liabilities, if any, arising out of these claims.  Based on our evaluation of the exposure to date, we do not expect the liability, if any, resulting from these claims to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

One of our subsidiaries was named as a defendant, along with numerous other companies, in lawsuits arising out of the subsidiary’s manufacture and sale of heat exchangers, and involvement in the construction and refurbishment of major industrial complexes alleging bodily injury or personal injury as a result of exposure to asbestos.  As of December 31, 2023, the subsidiary was a defendant in approximately 257 lawsuits with a corresponding number of plaintiffs.  For many of these lawsuits, we have not been provided sufficient information from the plaintiffs to determine whether all or some of the plaintiffs have claims against the subsidiary, the basis of any such claims, or the nature of their alleged injuries.  The operating assets of the subsidiary were sold in 1989.  In December 2021, the subsidiary and certain insurers agreed to a settlement of outstanding disputes that provide the subsidiary with cash.  An earlier settlement, achieved in September 2018, provided the subsidiary with cash and an annuity that begins making payments in 2024.  Together with a coverage-in-place agreement with certain insurers and additional coverage issued by other insurers, we believe the subsidiary has sufficient resources to respond to both the current lawsuits as well as future lawsuits of a similar nature.  While we cannot predict or provide assurance as to the outcome of these matters, we do not expect the ultimate liability, if any, resulting from these claims to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Other matters—We are involved in various regulatory matters and a number of claims and lawsuits, asserted and unasserted, all of which have arisen in the ordinary course of our business.  We do not expect the liability, if any, resulting from these other matters to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.  We cannot predict with certainty the outcome or effect of any of the litigation matters specifically described above or of any such other pending, threatened, or possible litigation or liability.  We can provide no assurance that our beliefs or expectations as to the outcome or effect of any tax, regulatory, lawsuit or other litigation matter will prove correct and the eventual outcome of these matters could materially differ from management’s current estimates.

Environmental matters

We have certain potential liabilities under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state acts regulating cleanup of hazardous substances at various waste disposal sites, including those described below.  CERCLA is intended to expedite the remediation of hazardous substances without regard to fault.  Potentially responsible parties (“PRPs”) for each site include present and former owners and operators of, transporters to and generators of the substances at the site.  It is difficult to quantify the potential cost of environmental matters and remediation obligations.  Liability is strict and can be joint and several.

AR – 27

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

One of our subsidiaries was named as a PRP in connection with a site located in Santa Fe Springs, California, known as the Waste Disposal, Inc. site.  We and other PRPs agreed, under a participation agreement with the U.S. Environmental Protection Agency (the “EPA”) and the U.S. Department of Justice, to settle our potential liabilities by remediating the site.  The remedial action for the site was completed in 2006.  Our share of the ongoing operating and maintenance costs has been insignificant, and we do not expect any additional potential liabilities to be material.  Resolutions of other claims by the EPA, the involved state agency or PRPs are at various stages of investigation.  Nevertheless, based on available information with respect to all environmental matters, including all related pending legal proceedings, asserted legal claims and known potential legal claims that are likely to be asserted, we do not expect the ultimate liability, if any, resulting from such matters, to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Note 14—Equity

Share issuance—In September 2023, we issued 11.9 million Transocean Ltd. shares with an aggregate value of $99 million to acquire the outstanding ownership interests of Liquila (see Note 4—Unconsolidated Affiliates and Note 7—Long-Lived Assets).  In the year ended December 31, 2023, we issued 65.1 million shares to certain holders that elected to exchange exchangeable bonds under terms of the governing indentures (see Note 9—Debt).

We maintain an at-the-market equity offering program (the “ATM Program”).  We intend to use the net proceeds from our ongoing ATM Program for general corporate purposes, which may include, among other things, the repayment or refinancing of indebtedness and the funding of working capital, capital expenditures, investments and additional balance sheet liquidity.  In June 2021, we entered into an equity distribution agreement with a sales agent for the offer and sale of our shares, with a maximum aggregate net offering price of up to $400 million, under the ATM Program.  In August 2022, we entered into an equity distribution agreement with a sales agent for the offer and sale of our shares, with a maximum aggregate net offering price of up to $435 million, under the ATM Program.  In the year ended December 31, 2023, we did not issue any shares under the ATM Program.  In the years ended December 31, 2022 and 2021, we received aggregate cash proceeds of $263 million and $158 million, respectively, net of issue costs, for the aggregate sale of 61.0 million shares and 36.1 million shares, respectively, under the ATM Program.

Warrants—In September 2022, we issued 22.2 million warrants to purchase Transocean Ltd. shares.  The warrants may be exercised by holders at any time prior to the close of business on March 13, 2026 at an exercise price equal to $3.71 per share, subject to certain anti-dilutive adjustments, and at our election, such exercise may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares.  If at any time prior to expiration, the closing price of Transocean Ltd. shares equals or exceeds $10.00 per share, subject to adjustment upon the occurrence of certain events, for a period of five consecutive trading days, we will have the right to effect an exercise of all, but not less than all, of the warrants upon notice to holders.  The initial carrying amount of the warrants, recorded in additional paid-in capital and measured at the estimated fair value on the date of issuance, was $16 million, net of issue costs.  We estimated the fair value of the warrants by employing a binomial lattice model and by using significant other observable inputs, representative of Level 2 fair value measurements, including the expected volatility of the market price for our shares.

Shares held by subsidiaries—One of our subsidiaries holds our shares for future use to deliver shares in connection with sales under the ATM Program and in connection with awards granted under our incentive plans or other rights to acquire our shares.  At December 31, 2023 and 2022, our subsidiary held 34.7 million and 75.4 million shares, respectively.

Note 15—Share-Based Compensation

Overview

We have a long-term incentive plan (the “Long-Term Incentive Plan”) for executives, key employees and non-employee directors under which awards can be granted in the form of restricted share units, restricted shares, stock options, stock appreciation rights and cash performance awards.  Awards may be granted as service awards that are earned over a defined service period or as performance awards that are earned based on the achievement of certain market factors or performance targets or a combination of market factors and performance targets.  The compensation committee of our board of directors determines the terms and conditions of the awards granted under the Long-Term Incentive Plan.  At December 31, 2023, we had 115.7 million shares authorized and 31.2 million shares available to be granted under the Long-Term Incentive Plan.  At December 31, 2023, the total unrecognized compensation cost related to our unvested share-based awards was $42 million, which we expect to recognize over a weighted-average period of 1.72 years.

Service awards typically vest either in three equal annual installments beginning on the first anniversary date of the grant or in an aggregate installment at the end of the stated vesting period.  Service-based stock options, once fully vested, are typically exercisable during a seven-year period.  Performance awards are typically subject to a three-year measurement period and typically vest in one aggregate installment following the ultimate determination date.

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Service awards

Restricted share units—A restricted share unit subject to service requirements is a notional unit that is equal to one share but has no voting rights until the underlying share is issued.  The following table summarizes unvested activity during the year ended December 31, 2023 for service-based units granted under our incentive plan:

	Number	Weighted-average
	of	grant-date fair value
	units	per unit
Unvested at January 1, 2023	12,047,500	$	3.25
Granted	3,744,049		7.23
Vested	(6,200,155)		2.94
Forfeited	(31,386)		3.56
Unvested at December 31, 2023	9,560,008	$	5.01

In the year ended December 31, 2023, the service-based units that vested had an aggregate grant-date fair value of $18 million.  In the years ended December 31, 2022 and 2021, we granted 6,768,943 and 6,148,361 service-based units, respectively, with a per unit weighted-average grant-date fair value of $3.60 and $3.56, respectively.  In the years ended December 31, 2022 and 2021, we had 5,075,374 and 4,368,749 service-based units, respectively, that vested with an aggregate grant-date fair value of $18 million and $16 million, respectively.

Stock options—The following table summarizes activity during the year ended December 31, 2023 for vested and unvested service-based stock options outstanding under our incentive plan:

				Weighted-average
	Number	Weighted-average		remaining	Aggregate
	of shares	exercise price		contractual term	intrinsic value
	under option	per share		(years)	(in millions)
Outstanding at January 1, 2023	4,175,520	$	10.63	4.82	$	—
Forfeited	(25,017)		59.30
Expired	(66,574)		59.30
Outstanding at December 31, 2023	4,083,929	$	9.54	3.92	$	—
Vested and exercisable at December 31, 2023	4,083,929	$	9.54	3.92	$	—

In the years ended December 31, 2022 and 2021, the stock options that vested had an aggregate grant-date fair value of $4 million and $9 million, respectively.  At December 31, 2023 and 2022, there were no outstanding unvested stock options to purchase our shares.

Performance awards

Restricted share units—A restricted share unit subject to performance requirements is a notional unit for which the awarded number of shares to be issued per unit remains uncertain until quantified as of the ultimate determination date following completion of the performance period. The following table summarizes unvested activity during the year ended December 31, 2023 for performance-based units under our incentive plan:

	Number	Weighted-average
	of	grant-date fair value
	units	per unit
Unvested at January 1, 2023	6,545,369	$	3.81
Granted	1,912,292		6.74
Vested	(3,025,512)		3.70
Unvested at December 31, 2023	5,432,149	$	4.91

In the years ended December 31, 2023, 2022 and 2021, the performance-based units that vested had an aggregate grant-date fair value of $11 million, $5 million and $11 million, respectively.  In the years ended December 31, 2022 and 2021, we granted 3,519,857 and 3,025,512 performance-based units, respectively, with a per unit weighted-average grant-date fair value of $3.91 and $3.70, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Note 16—Supplemental Balance Sheet Information

Other current liabilities were comprised of the following (in millions):

	December 31,
	2023		2022
Other current liabilities
Accrued employee benefits and payroll-related liabilities	$	145	$	156
Accrued interest		146		113
Accrued taxes, other than income		47		41
Finance lease liability		43		40
Operating lease liabilities		12		7
Deferred revenues		165		124
Contingent liabilities		116		58
Other		7		—
Total other current liabilities	$	681	$	539

Other long-term liabilities were comprised of the following (in millions):

	December 31,
	2023		2022
Other long-term liabilities
Postemployment benefit plan obligations	$	121	$	170
Finance lease liability		276		323
Operating lease liabilities		108		100
Income taxes payable		80		129
Deferred revenues		233		204
Other		40		39
Total other long-term liabilities	$	858	$	965

Note 17—Supplemental Cash Flow Information

The reconciling adjustments of our net cash provided by operating activities that were attributable to the net change in other operating assets and liabilities were as follows (in millions):

	Years ended December 31,
	2023		2022		2021
Changes in other operating assets and liabilities
(Increase) decrease in accounts receivable	$	(99)	$	(15)	$	137
Increase in other assets		(98)		(12)		(13)
Increase (decrease) in accounts payable and other current liabilities		135		8		(52)
Decrease in other long-term liabilities		(7)		(2)		(3)
Change in income taxes receivable / payable, net		(36)		(42)		(17)
Change in receivables from / payables to affiliates, net		(8)		(12)		(15)
	$	(113)	$	(75)	$	37

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Additional cash flow information was as follows (in millions):

		Years ended December 31,
		2023		2022		2021
Certain cash operating activities
Cash payments for interest		$	408	$	355	$	429
Cash payments for income taxes			41		66		57
Non-cash investing and financing activities
Capital additions accrued at end of period	(a)	$	36	$	31	$	28
Capital additions acquired in exchange for debt	(b)		—		382		—
Acquisition of outstanding ownership interests in exchange for shares	(c)		99		—		—
Debt investment exchanged for equity ownership interests	(d)		37		—		—
Finance lease installments settled with credits issued to customer	(e)		44		41		—
Shares issued in exchanges of exchangeable bonds	(f)		434		—		—
Debt and warrants issued in exchange transactions	(g)		—		110		260

(a) Additions to property and equipment for which we had accrued a corresponding liability in accounts payable at the end of the period.  See Note 7—Long-Lived Assets.

(b) In the year ended December 31, 2022, we borrowed an aggregate principal amount of $439 million under the Shipyard Loans to satisfy a portion of the final milestone payments due upon delivery of Deepwater Atlas and Deepwater Titan and recorded the initial carrying amount, net of imputed interest, with a corresponding entry to construction in progress, recorded in property and equipment.  See Note 7—Long-Lived Assets and Note 9—Debt.

(c) In September 2023, we issued 11.9 million Transocean Ltd. shares to acquire the outstanding ownership interests in Liquila.  See Note 4—Unconsolidated Affiliates, Note 7—Long-Lived Assets and Note 14—Equity.

(d) In September 2023, we agreed to exchange borrowings due to us under a financing arrangement with Orion for additional equity ownership interests in Orion.  See Note 4—Unconsolidated Affiliates.

(e) In the years ended December 31, 2023 and 2022, we agreed to settle installments due to the lessor under our finance lease by issuing corresponding credits to our customer for amounts due to us under the drilling contract.  See Note 8—Leases.

(f) In the year ended December 31, 2023, we issued 65.1 million Transocean Ltd. shares to certain holders that elected to exchange the 2.50% Senior Guaranteed Exchangeable Bonds, the 4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds.  SeeNote 9—Debt and Note 14—Equity.

(g) In the year ended December 31, 2022, in connection with the 2022 Private Exchange, we issued $112 million aggregate principal amount of the 4.625% Senior Guaranteed Exchangeable Bonds with an estimated fair value of $105 million and 6.7 million warrants to purchase Transocean Ltd. shares with an estimated fair value of $5 million.  In the year ended December 31, 2021, in connection with the 2021 Private Exchange, we issued $294 million aggregate principal amount of the 4.00% Senior Guaranteed Exchangeable Bonds with an estimated fair value of $260 million.  See Note 9—Debt and Note 14—Equity.

Note 18—Financial Instruments

Overview—The carrying amounts and fair values of our financial instruments were as follows (in millions):

	December 31, 2023				December 31, 2022
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value
Cash and cash equivalents	$	762	$	762	$	683	$	683
Restricted cash and cash equivalents		233		233		308		308
Long-term loans receivable from unconsolidated affiliates		6		6		41		43
Total debt		7,413		7,308		7,347		6,412

Cash and cash equivalents—Our cash and cash equivalents are primarily invested in demand deposits, short-term time deposits and money market funds.  The carrying amount of our cash and cash equivalents represents the historical cost, plus accrued interest, which approximates fair value because of the short maturities of the instruments.

Restricted cash and cash equivalents—Our restricted cash and cash equivalents, which are subject to restrictions due to collateral requirements, legislation, regulation or court order, are primarily invested in demand deposits and money market funds.  The carrying amount of our restricted cash and cash equivalents represents the historical cost, plus accrued interest, which approximates fair value because of the short maturities of the instruments.

Long-term loans receivable from unconsolidated affiliates—The carrying amount of our long-term loans receivable from unconsolidated affiliates, recorded in other assets, represents the principal amount of the cash investment.  We estimated the fair value of our long-term loans receivable from unconsolidated affiliates using significant unobservable inputs, representative of Level 3 fair value measurements, including the terms and credit spreads for the instruments.

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TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Total debt—The carrying amount of our total debt represents the principal amount, contractual interest payments of previously restructured debt and unamortized discounts, premiums and issue costs.  The carrying amount and fair value of our total debt includes amounts related to certain exchangeable debt instruments (see Note 9—Debt).  We estimated the fair value of our total debt using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads for the instruments and, with respect to the exchangeable debt instruments, the expected volatility of the market price for our shares.

Note 19—Risk Concentration

Interest rate risk—We are exposed to the interest rate risk related to our fixed-rate debt when we refinance maturing debt with new debt or when we early retire debt in open market repurchases, exchanges or other market transactions.  We are also exposed to interest rate risk related to our restricted and unrestricted cash equivalents, as the interest income earned on these investments is based on variable or short-term interest rates, which change with market interest rates.

Equity price risk—We are exposed to equity price risk primarily related to the bifurcated compound exchange feature contained within the 4.625% Senior Guaranteed Exchangeable Bonds.  The market price of our shares is the primary driver of the fair value of the exchange feature.  An increase to the market price of our shares yields an increase to the carrying amount of the exchange feature, recorded as a component of our debt, and a corresponding increase to interest expense.

Currency exchange rate risk—We are exposed to currency exchange rate risk primarily related to contract drilling revenues, employee compensation costs and purchasing costs that are denominated in currencies other than our functional currency, the U.S. dollar.  We use a variety of techniques to minimize the exposure to currency exchange rate risk, including the structuring of customer contract payment terms and occasional use of forward exchange contracts.  Our primary tool to manage currency exchange rate risk involves structuring customer contracts to provide for payment in both U.S. dollars and local currency.  The payment portion denominated in local currency is based on anticipated local currency requirements over the contract term.  Due to various factors, including customer acceptance, local banking laws, national content requirements, other statutory requirements, local currency convertibility, local inflation and revenue efficiency, actual local currency needs may vary from those realized in the customer contracts, resulting in partial exposure to currency exchange rate risk.  The currency exchange effect resulting from our international operations generally has not had a material impact on our operating results.

Credit risk—We are exposed to concentrations of credit risk primarily related to our restricted and unrestricted cash and cash equivalents and customer receivables, both current and long-term.  We generally maintain our restricted and unrestricted cash and cash equivalents in time deposits at commercial banks with high credit ratings or mutual funds, which invest exclusively in high-quality money market instruments, and because we limit the amount of exposure to any one institution, we do not believe we are exposed to any significant credit risk.  Our customer receivables, which are dispersed in various countries, are due from integrated energy companies, government-owned or government-controlled energy companies and other independent energy companies.  For such receivables, we establish an allowance for credit losses by applying an expected loss rate based on current and forecasted future and historical experience.  Although we have encountered only isolated credit concerns related to independent energy companies, we occasionally require collateral or other security to support customer receivables.  In certain infrequent instances, when we determine that collection is not reasonably assured, we may offer extended payment terms and recognize revenues associated with the contract on a cash basis.

Labor agreements—At December 31, 2023, we had a global workforce of approximately 5,800 individuals, including approximately 370 contractors.  Approximately 42 percent of our total workforce, working primarily in Norway and Brazil, are represented by, and some of our contracted labor work is subject to, collective bargaining agreements, substantially all of which are subject to annual salary negotiation.  Negotiations over annual salary or other labor matters could result in higher personnel or other costs or increased operational restrictions or disruptions.  The outcome of any such negotiation generally affects the market for all offshore employees, not only union members.  A failure to reach an agreement on certain key issues could result in strikes, lockouts or other work stoppages.

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