QS Research · Michael Burry's Scion Capital analyst template · 2006
Transocean Ltd. (RIG)
As of 2026-11-10 · 11/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case none · downside -20% · upside +25%
Normalized operating income is -$909.9M (N35) on a -22.6% cycle-average margin (N36), so the base is not a normalized-earnings value but a TTM EBITDA cash-flow support, the same EBITDA base section 13 uses for its cross-check. At today's 7.3x EV/EBITDA (N26), 7.3 x $1.41B TTM EBITDA (N14) = $10.29B EV (N24), less $4.52B net debt (N22) = $5.77B equity, or $5.17/share (N1), i.e. 0%. The downside annualizes Q3 2026 adjusted EBITDA of $313M (S101) to $1.252B, giving 7.3 x $1.252B = $9.14B EV, less $4.52B = $4.62B, or $4.14/share (-20%); the upside adds the $200M Valaris synergies to $1.41B, giving 7.3 x $1.61B = $11.75B EV, less $4.52B = $7.23B, or $6.48/share (+25%). That is not enough asymmetry for a long or short, so watch: the negative normalized earnings are the reason not to pay up, while backlog, deleveraging and the Valaris closing are the reason not to short.
Key numbers
- Share price: $5.17
- Market cap: $5.77B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $4.03B
- EV / EBITDA (TTM): 7.3x
- P/E (TTM): 19.8x
- Price / book: 0.68x
The 15 boxes
- ✓ 1. Long-form business notes
Transocean is a one-segment offshore contract driller: as of February 17, 2026 it owned or partly owned and operated 27 floaters (20 ultra-deepwater drillships, 7 harsh environment semisubmersibles), hired out with crews and equipment on a worldwide basis. Revenue recovered from $3.15B in FY2020 to $3.96B in FY2025, but operating income went from -$493.0M to -$2.34B and net income to common was -$2.92B in FY2025, funded by operating cash flow of $749.0M against capex of only $123.0M. Between the two annual reports the corporate office list moved from the Cayman Islands to Bermuda, the share count grew from 616,025,144 (February 16, 2021) to 1,102,848,748 (February 17, 2026), and total equity fell from $11.43B (FY2020) to $8.11B (FY2025).
- ○ 2. Competitive advantage
Nothing in the margin or return history supports a durable advantage: operating income was negative in every fiscal year from FY2020 to FY2025, from -$31.0M in FY2022 to -$2.34B in FY2025, on revenue that still grew to $3.96B, and total equity fell from $11.43B to $8.11B while diluted shares rose from 615.0M to 960.0M with no buybacks in any year. The claimed edge is a fleet and technology edge — 27 floaters, 20 ultra-deepwater drillships, dual-activity and 1,700-ton/20,000-psi equipment — but it has not produced pricing power: backlog fell 28% in FY2025 to $6.29B and contracts are individually bid, dayrate-based and cancelable for convenience. Competition is with other drilling contractors obtained via bidding; the only competitor the sources name is Valaris, which Transocean agreed on February 9, 2026 to acquire in an all-stock merger.
- ✓ 3. 10-Q takeaways
Q3 2026 revenue fell year over year on lower rig utilization, but operating income was positive at $143M after a $1,913M impairment in Q3 2025; net income of $26M was not clean, with a $101M tax benefit and a $101M benefit-plan settlement loss, while adjusted net income was $1M. Cash flow was positive, liquidity was $1.3B, backlog rose to $7,966M at November 2, 2026, and the earnings release gives numeric 4Q26E/FY26E/FY27 guidance. The 10-Q risk-factor source points back to the FY2025 10-K; no Q3 2026-specific risk-factor diff or buyback amount appears in the provided sources.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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