Offshore drilling contractor Transocean sees an offshore rebound by late 2026 with rig contracting activity picking up alongside day rates.
“While the pace of contracting activity has been measured since the middle of last year, all projections suggest we are nearing the end of this temporary slowdown,” Transocean CEO Keelan Adamson said Aug. 5 on the company’s earnings call. “Indeed, we are engaged in multiple conversations with customers on attractive opportunities for work well into the future and have a line of sight to a number of forthcoming tenders.”
The brighter outlook was delivered as the need for oil and gas rises worldwide and onshore reserves decline. E&Ps are directing capital offshore, and exploration activity is climbing, especially offshore parts of Africa, Asia, Brazil and the Mediterranean Sea. The need for more rigs is also expected as operators pursue more remedial work and stimulations to increase production offshore.
“Future projections for activity is very, very positive,” Adamson said. “We’re going to see more of the active fleet being contracted and as we move out into the end of this year and into 2026, we’re going to see a lot more contracting activity and tendering activity for the out years of ‘26 and beyond.”
With a fleet of 34 mobile offshore drilling units, including 26 ultra-deepwater and eight harsh environment floaters, Adamson said the company will manage its portfolio in a “disciplined and selective manner, endeavoring to extract the greatest value possible” from its fleet while improving its overall financial flexibility and reducing debt.
Improving conditions
The offshore drilling sector has faced some tough times in recent quarters amid market volatility such as fluctuating oil prices, delayed project sanctioning and rig tenders, shifting energy policies and higher project costs compared to onshore drilling. However, evidence of a recovery ahead are seen in rising offshore rig tenders, discoveries and energy demand along with continued technological advances.
Transocean reported contract drilling revenue of $988 million for second-quarter 2025, up compared to $861 million a year earlier. Its adjusted net income for the quarter was $19 million, up from a loss of $123 million a year ago.
The company’s fleet backlog was approximately $7 billion. Total fleet average rig utilization increased to 67.3%, up from 57.8% a year earlier.
“Under all market conditions, our fleet has maintained higher average utilization and premium day rates. We believe that we have a very effective and successful commercial strategy,” Adamson said. “We are continually evaluating market dynamics from a supply and demand perspective, carefully assessing individual opportunities to ensure we are deploying each asset into the right project at the right time.”
He added the company is on track to lower its cash costs by about $100 million and reduce its debt by more than $700 million this year.
Transocean’s latest fleet status report shows operators’ interest in offshore drilling rigs. Transocean Equinox lined up work in Australia at a dayrate of $540,000; Transocean Spitsbergen landed a two-well option off Norway at a dayrate of $395,000. Deepwater Skyros and Deepwater Mykonos also secured jobs off the Ivory Coast and Brazil.
“We continue to expect the market to tighten by late 2026 and into early 2027 at which point we expect the global active ultra deepwater fleet will once again approach utilization exceeding 90%,” Adamson said. “This should result in upward pressure on day rates. Third-party analyst data supports our views.”
Wood Mackenzie analysis shows deepwater and ultra-deepwater development capex rising 23% to $79 billion in 2027, up from $64 billion in 2025. The higher demand is expected to be driven by Africa, the Mediterranean Sea and Asia.
“If known programs materialize as currently projected, there could be an incremental four drillships working in Africa in 2027 and an additional two in the Mediterranean,” he said. “We are optimistic that commencement windows for these programs will continue to remain generally stable as many of them are progressing through the tender process.”
Regional outlook
Current tenders signal up to four drillships will be needed within the next two years in the Asia-Pacific region, including by Chevron in Australia as well as ONGC, Reliance and Cairn in India, Adamson said. He added activity levels in the U.S. Gulf, Latin America and Brazil are expected to remain stable, while demand for harsh water environment semi-submersible remains strong in Norway and elsewhere internationally.
The outlook for Africa is also strong, according to Roddie Mackenzie, chief commercial officer for Transocean. Tenders include three for Nigeria, three for Mozambique and two each for Ivory Coast and Ghana.
“So there seems to be quite a lot there in terms of decent long-term activity and we are seeing a number of these six-month opportunities,” he said.
Adamson also pointed out activity in the Orange Basin, particularly offshore Namibia and South Africa where companies such as TotalEnergies are active.
“In the Orange Basin, meaning Namibia and South Africa, operators will soon begin the development phases of their discoveries, which will require at least one additional harsh environment semi-submersible,” Adamson said.
The executives also pointed out expectations for a surge in exploration, creating the need for more rigs. BP made its largest oil and gas discovery in 25 years at the Bumerangue prospect offshore Brazil. The company on Aug. 4 said its exploration well hit an estimated 500-m hydrocarbon column in a high-quality presalt carbonate reservoir in the Santos Basin.
“There is actually a reasonably good increase expected in exploration wells to be drilled in ‘26 to ‘27, about 25% increase in year,” Mackenzie said. “So, it appears that as the operators are really shifting their focus back to oil and gas, kind of retooling if you would, to move into the profitable core business. We are certainly beginning to see the green shoots show up in these kinds of prospects.”
Adamson added “that only bodes well for absorbing capacity in the market, whether it’s in Brazil or Africa or elsewhere around the world.”