2018._RIG_FORMS4

Table of Contents

 

As filed with the Securities and Exchange Commission on February 6, 2018

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM S-4

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933


TRANSOCEAN LTD.

TRANSOCEAN INC.

(Exact name of registrant as specified in its charter)


 

 

Transocean Ltd.

Transocean Inc.

Switzerland

Cayman Islands

(State or Other Jurisdiction of Incorporation or Organization)

(State or Other Jurisdiction of Incorporation or Organization)

1381

6719

(Primary Standard Industrial Classification Code Number)

(Primary Standard Industrial Classification Code Number)

98-0599916

66-0582307

(I.R.S. Employer Identification No.)

(I.R.S. Employer Identification No.)

Turmstrasse 30
6312 Steinhausen, Switzerland
+41 (22) 930-9000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

70 Harbour Drive
Grand Cayman, Cayman Islands KY1-1003
+1 (345) 745-4500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)


Brady K. Long

Senior Vice President and General Counsel

Transocean Ltd.

c/o Transocean Offshore Deepwater Drilling Inc.

4 Greenway Plaza

Houston, Texas 77046

+1 (713) 232-7500

(Name, address, including zip code, and telephone number, including area code, of agent for service)


 

 

With copies to:

Keith M. Townsend
King & Spalding LLP
1180 Peachtree Street
Atlanta, Georgia 30309
+1 (404) 572-4600

Martin J. Hunt
King & Spalding LLP
1100 Louisiana Street, Suite 4000
Houston, Texas 77002
+1 (713) 751-3200


Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

 

Large accelerated filer   

Accelerated filer                     

Non-accelerated filer      (Do not check if a smaller reporting company)

Smaller reporting company    

 

Emerging growth company    

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  

 

 


 

Table of Contents

CALCULATION OF REGISTRATION FEE

 

 

 

 

 

 

 

 

 

 

Title of Each Class of Securities to Be Registered

    

Amount to be
Registered

    

Proposed
Maximum
Offering Price
Per Unit

    

Proposed
Maximum
Aggregate
Offering Price

    

Amount of
Registration Fee
(1)

 

Shares, par value CHF 0.10

 

1,599,589

(2)  

N/A

 

USD 33,408,436.19

(3)  

USD 4,159.35

 

0.5% Exchangeable Senior Bonds due 2023

 

USD 13,420,370

(2)

N/A

 

USD 33,408,436.19

(3)

N/A

(4) 

Shares, par value CHF 0.10

 

(6)  

 

 

(5)

Guarantee of the 0.5% Exchangeable Senior Bonds due 2023

 

 

 

 

(7)


(1)

Determined in accordance with Section 6(b) of the Securities Act at a rate equal to USD 124.50 per USD 1 million of the proposed maximum aggregate offering price.

(2)

Represents the maximum number of shares, par value CHF 0.10 per share (“Transocean Shares”), of Transocean Ltd. (“Transocean”) and 0.5% Exchangeable Senior Bonds due 2023 (the “New Exchangeable Bonds”) of Transocean Inc., respectively, estimated to be issuable upon completion of the offer. Based on an aggregate 4,477,546 shares, with a nominal value of 0.10 EUR per share (“Songa Shares”), of Songa Offshore SE (“Songa Offshore”), subject to the offer as of January 31, 2018 consisting of (i) 4,475,201 Songa Shares outstanding and not owned by Transocean and (ii) 2,345 Songa Shares issuable upon exercise of outstanding warrants to purchase Songa Shares and not owned by Transocean.

(3)

Pursuant to Rule 457(c) and Rule 457(f) under the Securities Act of 1933, as amended (the “Securities Act”), and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is calculated as the product of (i) 4,477,546  Songa Shares subject to the Offer and (ii) the average of the high and low sale prices of Songa Shares as reported on the Oslo Stock Exchange on January 31, 2018 of NOK 57.35 (based on the noon buying rate of NOK 7.6863 for USD 1 as of January 26, 2018).

(4)

Covered by the filing fee paid in respect of the Transocean Shares being issued in the Offer as consideration being offered to holders of Songa Shares consists of both Transocean Shares and New Exchangeable Bonds for each Songa Share, with offers and sales of Transocean Shares and New Exchangeable Bonds being made to the same individuals.

(5)

Includes an indeterminate number of shares issuable upon exchange of the New Exchangeable Bonds at the initial exchange rate of approximately 97.29756 Transocean Shares per USD 1,000 principal amount of New Exchangeable Bonds. Pursuant to Rule 416 under the Securities Act, such number of Transocean Shares registered hereby shall include an indeterminate number of Transocean Shares that may be issued in connection with a stock split, stock dividend, recapitalization or similar event. Pursuant to Rule 457(i), there is no additional filing fee with respect to the Transocean Shares issuable upon exchange of the New Exchangeable Bonds because no additional consideration will be received in connection with the exercise of the exchange right.

(6)

Pursuant to Rule 457(n), there is no additional filing fee with respect to the Guarantee by Transocean of the New Exchangeable Bonds.

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 


 

Table of Contents

EXPLANATORY NOTE

This registration statement relates to the registration with the Securities and Exchange Commission (“SEC”) of shares in Transocean Ltd. (“Transocean”) and exchangeable bonds issued by Transocean Inc. (“TINC”) and fully and unconditionally guaranteed by Transocean, all of which will be issued to shareholders of Songa Offshore SE (“Songa Offshore”) in Transocean’s compulsory acquisition (squeeze-out) (the “Compulsory Acquisition”) of all remaining shares in Songa Offshore not owned by Transocean.  Such Compulsory Acquisition is governed by article 36 of the Cyprus Takeover Bids Law (L.41(I)/2007) as amended (the “Cyprus Takeover Bids Law”). This registration statement contains two documents:

·

a prospectus; and

·

a prospectus (“Norwegian Prospectus”) that has been prepared in accordance with the Norwegian Securities Trading Act and was submitted to the Financial Supervisory Authority of Norway (Finanstilsynet) (the “Norwegian FSA”) in connection with the Compulsory Acquisition.

The prospectus has been prepared in accordance with the Securities Act of 1933, as amended, and incorporates by reference certain information from Transocean’s filings made under the Securities Exchange Act of 1934, as amended.  The Norwegian Prospectus has been prepared in accordance with the Norwegian Securities Trading Act of 29 June 2007 no. 75 and related secondary legislation, including the Commission Regulation (EC) no. 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council of November 4, 2003 regarding information contained in prospectuses, as amended and as implemented in Norway.

The prospectus included in this registration statement and the Norwegian Prospectus are substantially the same in all respects, except that:

·

the Norwegian Prospectus has a different cover page and introductory information for investors prior to its table of contents, a copy of which is included herein beginning on page ALT-1;

·

the Norwegian Prospectus includes the section titled “Summary,” a copy of which is included herein beginning on page ALT-6;

·

the Norwegian Prospectus includes additional sections titled “Responsibility for the Prospectus,” “General Information,” “Financial Condition, Liquidity and Capital Resources of the Songa Group,” “Selling and Transfer Restrictions,” “Industry and Market Overview,” “Business of the Transocean Group,” “Operating and Financial Review of the Transocean Group,” “Board of Directors, Management and Employees” and “Additional Information,” copies of which are included herein beginning on page ALT-32;

·

the following sections of the prospectus included in this registration statement are not required to appear in the Norwegian Prospectus pursuant to the Norwegian Securities Trading Act and are instead included in an annex to the Norwegian Prospectus;

o

Questions and Answers,”

o

 Summary,”

o

Summary Selected Financial Data of Transocean,”

o

 “Unaudited Per Share Data,”

o

Comparative Market Price and Dividend Information,”

o

The Combination,”

o

Ratio of Earnings to Fixed Charges,”

 


 

Table of Contents

o

Dilution,”

o

Selected Financial Data of Transocean,”

o

 “Description of Transocean New Exchangeable Bonds,”

o

Experts,”

o

Where You Can Find More Information,” and

o

Incorporation of Certain Documents by Reference;”

·

references in the prospectus in this registration statement that any information will be incorporated by reference and where such information can be obtained were replaced by references to such information included in the Norwegian Prospectus;

·

the sections and captions in the Norwegian Prospectus are numbered in the manner customary under Norwegian disclosure practices;

·

the format of dates presented in the Norwegian Prospectus has been presented in the manner customary in the European Union; and

·

the cross-references, the order of sections and therefore the table of contents, as well as the page numbers, of each document are different as a result of the differences outlined above.

For additional information, see pages ALT‑1 to ALT‑156 titled “Alternate Information for the Norwegian Prospectus.”

 

 


 

Table of Contents

Compulsory acquisition of each outstanding share of

Songa Offshore SE

for

0.35724 newly issued shares in Transocean Ltd. and USD 2.99726 principal amount of 0.5% Exchangeable Senior Bonds due 2023, to be issued by Transocean Inc. Shareholders who do not respond will instead receive cash consideration of NOK 47.50 per share of Songa Offshore SE

by

Transocean Ltd.


This prospectus (the “Prospectus”) has been prepared by Transocean Ltd., a corporation incorporated under the laws of Switzerland (“Transocean” or the “Company,” “we” or “us,” and together with its consolidated subsidiaries, the “Group”, and together with its consolidated subsidiaries except Songa Offshore SE and the Songa Offshore SE’s consolidated subsidiaries, the “Transocean Group”), in connection with its  compulsory acquisition (squeeze-out) (the “Compulsory Acquisition”)  of all remaining shares of Songa Offshore SE (the “Target” or “Songa Offshore,” and together with its consolidated subsidiaries, the “Songa Group”) not owned by Transocean.  Such Compulsory Acquisition is governed by article 36 of the Cyprus Takeover Bids Law (L.41(I)/2007) as amended (the “Cyprus Takeover Bids Law”). The Compulsory Acquisition is initiated following completion of a voluntary tender offer (the “Voluntary Tender Offer”) resulting in Transocean acquiring shares of Songa Offshore representing 97.67% (on a fully diluted basis as of January 30, 2018) of the voting rights of Songa Offshore.

The consideration in the Compulsory Acquisition (the “Consideration”) per share of Songa Offshore (the “Songa Shares”) consists of 0.35724 newly issued shares of Transocean (the “New Consideration Shares”), each with a par value of 0.10 Swiss franc (“CHF”), and USD 2.99726 principal amount of 0.5% Exchangeable Senior Bonds due 2023, which are exchangeable into shares of the Company (the “New Exchangeable Bonds”), to be issued by Transocean Inc. (“TINC”), an exempted company incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of Transocean, subject to the terms and conditions as described in this Prospectus. The aggregate amount of Consideration paid to each Songa Offshore shareholder shall be comprised, as near as possible, of 50% New Consideration Shares and 50% New Exchangeable Bonds.

Shareholders of Songa Offshore who wish to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition must complete and sign the Subscription Form enclosed with this Prospectus as Annex B and return it to the Settlement Agent prior to the expiration of the Subscription Period on [●], 2018 at [16:30] (CET).

Songa Offshore shareholders who do not respond or fail to submit duly executed Subscription Forms during the Subscription Period will receive an amount in cash of NOK 47.50 per Songa Share (the “Cash Alternative”) in lieu of all of the New Consideration Shares and New Exchangeable Bonds such shareholders would otherwise have been entitled to receive in the Compulsory Acquisition. Shareholders who wish to receive the Cash Alternative will not be required to take any action in respect of the Compulsory Acquisition during the Subscription Period

The shareholders of Songa Offshore are advised to consider carefully the potential tax consequences of its decision of the form of Consideration that such shareholders wishes to receive in the Compulsory Acquisition. See “Material Tax Considerations.”

Transocean’s shares (the “Shares”) and the 0.5% Exchangeable Senior Bonds due 2023 issued by TINC in the Voluntary Tender Offer (the “Existing Exchangeable Bonds”) are listed on the New York Stock Exchange (the “NYSE”) under the symbols “RIG.” and “RIG/23”, respectively. Songa Offshore’s shares are listed on the Oslo Stock Exchange under the symbol “SONG.”


See “Risk Factors” beginning on page 26 for a discussion of various factors that you should consider before making your investment decision.

Neither the Securities and Exchange Commission (“SEC”), nor any state or provincial securities commission or regulatory authority has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

The date of this Prospectus is February 6, 2018.

This Prospectus incorporates important business and financial information about Transocean from documents filed with the SEC that have not been included in, or delivered with, this Prospectus. This information is available on the SEC’s website at www.sec.gov and from other sources. See the sections of this Prospectus titled “Where You Can Find More Information” and “Incorporation of Certain Documents by Reference.”

You may also request copies of these documents from us, without charge, upon written or oral request to Transocean Ltd., c/o Transocean Offshore Deepwater Drilling Inc., 4 Greenway Plaza, Houston, Texas 77046, Attn: Investor Relations, or at +1 (713) 232‑7500.

In order to obtain timely delivery of the documents, you must make requests no later than five business days prior to the Compulsory Acquisition, as it may be extended from time to time.

We are responsible for the information contained in this Prospectus. We have not authorized anyone to give you any other information, and take no responsibility for any other information that others may give you. You should not assume that the information contained in this Prospectus is accurate as of any date other than the date on the front cover of this Prospectus.

This Prospectus does not constitute an offer of securities to the public in Norway and is not a prospectus or an offer document within the meaning of the Norwegian Securities Trading Act.

 

 

 


 

Table of Contents

TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS 

1

SUMMARY 

9

SUMMARY SELECTED FINANCIAL DATA OF TRANSOCEAN 

21

UNAUDITED PER SHARE DATA 

22

COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION 

23

Comparative Historical Market Price Information 

23

Dividends 

23

Recent and Comparative Market Price Information 

24

RISK FACTORS 

26

Risks Related to the Business of the Group 

26

Risks Related to the Industry in Which the Group Operates 

37

Financial Risks 

44

Risks Related to the Shares 

53

Risks Related to the New Exchangeable Bonds 

54

Risks Related to the Compulsory Acquisition 

59

FORWARD-LOOKING STATEMENTS 

61

TERMS OF THE COMPULSORY ACQUISITION 

64

General 

64

The Offeror – Transocean Ltd. 

64

The Target – Songa Offshore SE 

65

Consideration 

66

Subscription Period 

66

Blocking of Tendered Shares and Shareholder Rights 

68

Notices

69

Settlement 

69

Expenses 

72

Tax 

72

Dilution

73

Additional Information 

73

THE COMBINATION 

75

Background and Reasons for the Combination 

75

Projected Financial Information 

93

Summary of Clarksons’ Analyses 

98

Summary of Pareto’s Illustrative Calculations 

106

Summary of Independent Statement of ABG Sundal Collier ASA 

109

Material Interests of Songa Offshore’s Board and Management in the Compulsory Acquisition 

117

The Transaction Agreement 

117

DESCRIPTION OF THE SONGA OFFSHORE BUSINESS 

130

Corporate Information 

130

Legal Structure of the Songa Group 

130

The Business of the Songa Group 

133

Board of Directors, Management and Employees 

142

Share Capital 

143

Auditor 

143

CAPITALIZATION AND INDEBTEDNESS

144

Capitalization 

144

Indebtedness 

146

Contingent and Indirect Indebtedness 

147

Working Capital Statement 

147

RATIO OF EARNINGS TO FIXED CHARGES 

148

DILUTION 

149

SELECTED FINANCIAL INFORMATION OF TRANSOCEAN 

151

DIVIDENDS AND DIVIDEND POLICY 

152

Dividend Policy 

152

Dividend History 

152

Legal Constraints on the Distribution of Dividends 

153

DESCRIPTION OF TRANSOCEAN SHARES

154

Description of the Shares and Share Capital 

154

Stock Exchange Listing 

154

Share Capital History 

154

Ownership Structure 

155

Authorization to Increase the Share Capital and to Issue Shares 

155

Authorization to Acquire Treasury Shares 

158

Other Financial Instruments Related to Shares 

159

Shareholder Rights 

159

Summary of the Company’s Articles of Association 

159

Certain Aspects of Swiss Corporate Law 

162

Shareholders’ Agreement 

173

DESCRIPTION OF TRANSOCEAN NEW EXCHANGEABLE BONDS 

175

General 

175

Guarantee 

176

Ranking/Additional Debt 

176

Exchange Rights 

177

Repurchase Rights Following Fundamental Change or Tax Event 

190

Consolidation, Merger and Sale of Assets 

192

Additional Covenants 

193

Events of Default 

194

Tax Additional Amounts

195

Satisfaction and Discharge 

196

Amendments to the Indenture 

196

Global Exchangeable Bonds:  Book-Entry Form

198

Meetings of Holders 

199

Notices 

200

Information Regarding the Co-Trustees 

201

Governing Law 

201

BENEFICIAL OWNERSHIP OF TRANSOCEAN 

202

Security Ownership of Significant Shareholders 

202

Security Ownership of Transocean Directors and Executive Officers 

203

BENEFICIAL OWNERSHIP OF SHARES OF SONGA 

204

Security Ownership of Significant Shareholders 

204

Security Ownership of Songa Offshore Directors and Executive Officers 

204

COMPARISON OF SHAREHOLDER RIGHTS 

205

Purpose and Term of Existence 

205

Capitalization 

205

Preemptive Rights and Advance Subscription Rights 

207

Dividends and Other Distributions; Repurchases of Shares 

209

Approval of Business Combinations 

212

Mandatory Bid Rules 

215

Special Vote Required for Combinations with Interested Shareholders 

215

Appraisal Rights and Compulsory Acquisitions 

216

Election of Directors 

216

Vacancies on Board of Directors 

217

Removal of Directors 

217

Board and Committee Composition 

217

Duties of the Board of Directors 

219

Indemnification of Directors, Officers, and Others; Insurance 

219

Limitation on Director Liability 

220

Directors’ Conflicts of Interest 

221

Shareholders’ Suits 

222

Shareholder Consent to Action Without Meeting 

223

Annual Meetings of Shareholders 

223

Special Meetings of Shareholders

225

Record Dates for Shareholders Meetings

225

Director Nominations; Proposals of Shareholders 

226

Adjournment of Shareholder Meetings 

226

Voting Rights 

227

Amendment of Governing Documents 

230

Quorum Requirements 

230

Say on Pay 

231

Inspection of Books and Records; Special Investigation 

231

Transfer and Registration of Shares 

232

Rights upon Liquidation 

233

Enforcement of Civil Liabilities Against Foreign Persons 

233

MATERIAL TAX CONSIDERATIONS 

235

Norwegian Taxation 

235

United States Taxation 

237

Swiss Taxation 

252

LEGAL MATTERS 

255

EXPERTS 

255

WHERE YOU CAN FIND MORE INFORMATION 

255

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

257

 

 

ANNEX A – TRANSACTION AGREEMENT 

A-1

ANNEX B – SUBSCRIPTION FORM  

B-1

ANNEX C – INDEPENDENT STATEMENT OF ABG SUNDAL COLLIER ASA 

C-1

ANNEX D – STATEMENT BY THE BOARD OF DIRECTORS OF SONGA OFFSHORE SE 

D-1

 

 

 

 

i


 

Table of Contents

QUESTIONS AND ANSWERS

The following are some of the questions you, as a shareholder of Songa Offshore SE, may have and answers to those questions. These questions and answers are not meant to be a substitute for the information contained in the remainder of this Prospectus because the information in this section does not provide all the important information regarding the Compulsory Acquisition. We urge you to read this document in its entirety prior to making any decision as to the matters described in this Prospectus. In this Prospectus, unless otherwise specified, the terms “we,” “our,” “us,” “Company,” and “Transocean” refer to Transocean Ltd,. or Transocean Ltd. together with its subsidiaries, as the context requires.

Q:  WHAT IS TRANSOCEAN PROPOSING?

A:   Transocean is making the Compulsory Acquisition to acquire all remaining shares of Songa Offshore not owned by Transocean.  The Compulsory Acquisition is governed by article 36 of the Cyprus Takeover Bids Law. The Compulsory Acquisition is being initiated following completion of the Voluntary Tender Offer that resulted in Transocean acquiring shares of Songa Offshore representing 97.67% (on a fully diluted basis as of January 30, 2018) of the voting rights in Songa Offshore. The shares in Songa Offshore are expected to be delisted shortly following completion of the Compulsory Acquisition, subject to approval by the Oslo Stock Exchange. The Consideration in the Compulsory Acquisition per remaining Songa Share consists of (i) 0.35724 New Consideration Shares issued by Transocean and (ii) USD 2.99726 principal amount of New Exchangeable Bonds of TINC, a wholly-owned subsidiary of Transocean, which are exchangeable into Shares. The aggregate consideration to be paid to each Songa Offshore shareholder shall be comprised, as nearly as possible, of 50% New Consideration Shares and 50% New Exchangeable Bonds.

Shareholders of Songa Offshore who wish to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition must complete and sign the Subscription Form enclosed with this Prospectus as Annex B and return it to the Settlement Agent prior to the expiration of the Subscription Period on [●] 2018 at [16:30] (CET).

Songa Offshore shareholders who do not respond or fail to submit duly executed Subscription Forms during the Subscription Period will instead receive an amount in cash of NOK 47.50 per Songa Share (the Cash Alternative) in lieu of all of the New Consideration Shares and New Exchangeable Bonds such shareholders would otherwise have been entitled to receive in the Compulsory Acquisition. Shareholders who wish to receive the Cash Alternative will not be required to take any action in respect of the Compulsory Acquisition during the Subscription Period.

Songa Offshore shareholders may elect the form of consideration they wish to receive in the Compulsory Acquisition as set forth in this Prospectus.

Q:  WHO IS MAKING THE COMPULSORY ACQUISITION?

A:   This Compulsory Acquisition is being made by Transocean.

1


 

Table of Contents

Q:  WHY IS TRANSOCEAN MAKING THE COMPULSORY ACQUISITION?

A:   Following the completion of the Voluntary Tender Offer, Transocean owns 97.67% of the Songa Shares (on a fully diluted basis as of January 30, 2018).  Transocean believes that the Compulsory Acquisition, which will result in 100% of the Songa Shares owned by Transocean, will benefit Transocean shareholders.

Q:  WHAT WILL SONGA OFFSHORE SHAREHOLDERS RECEIVE IN EXCHANGE FOR SONGA SHARES?

A:   The consideration in Compulsory Acquisition for each Songa Share consists of:

(1)

0.35724 New Consideration Shares; and

(2)

USD 2.99726 principal amount of New Exchangeable Bonds.

Songa Offshore shareholders who do not respond during the Subscription Period (or who fail to submit duly executed Subscription Forms to the Settlement Agent before the expiration of the Subscription Period) will receive an amount in cash of NOK 47.50 per Songa Share in lieu of all of the New Consieration Shares and New Exchangeable Bonds such shareholder would otherwise be entitled to receive in the Compulsory Acquisition.

The aggregate consideration to be paid to each Songa Offshore shareholder shall be comprised, as nearly as possible, of 50% New Consideration Shares and 50% New Exchangeable Bonds.

Based on the closing price of USD 10.79 for the Shares on the NYSE on January 31, 2018 and an exchange rate of 7.6760 NOK per USD, which is the NOK/USD exchange rate on January 31, 2018 as determined by Norges Bank, the aggregate value of the Consideration to be received per Songa Share is NOK 53.74, assuming all New Exchangeable Bonds received in the Compulsory Acquisition are immediately converted into Transocean shares.  By comparison, the closing price of the Songa Shares on the Oslo Stock Exchange on January 31, 2018 was NOK 57.50.

Holders may exchange their New Exchangeable Bonds for Shares at any time prior to the close of business on the business day immediately preceding the maturity date. The initial exchange rate of the New Exchangeable Bonds is 97.29756 Shares per USD 1,000 principal amount of New Exchangeable Bonds. See “Description of Transocean New Exchangeable Bonds–Exchange Rights.”

Transocean will not issue any fractional New Consideration Shares or fractional amounts of New Exchangeable Bonds (each of which has a principal amount of USD 1,000) in the Compulsory Acquisition. Each Songa Offshore shareholder who elects to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquition and (a) who would otherwise be entitled to receive a fraction of a New Consideration Share will instead receive, for the fraction of a New Consideration Share, an amount in cash based on USD 8.39, the closing price of the Shares on the NYSE on August 14, 2017, the last trading day prior to the announcement of the Voluntary Tender Offer (the “Reference Price”), and (b) who would otherwise be entitled to receive a fractional amount of New Exchangeable Bonds will instead receive, for the fractional amount of New Exchangeable Bonds, an amount in cash based on USD 1,000, the principal amount per New Exchangeable Bond, and in each case, paid in NOK, based on an exchange rate of 7.9239 NOK per U.S. dollar which is the NOK/USD closing price at 4:00 p.m. CET as determined by Norges

2


 

Table of Contents

Bank, on August 14, 2017, the trading day immediately preceding the announcement of the Voluntary Tender Offer.

We refer to the value of any cash and/or the value of the aggregate number of New Consideration Shares and New Exchangeable Bonds to be delivered per Songa Offshore shareholder as the “Acquisition Price.”

Q:  HOW LONG DO SONGA OFFSHORE SHAREHOLDERS HAVE TO SUBSCRIBE FOR NEW CONSIDERATION SHARES AND NEW EXCHANGEABLE BONDS IN THE COMPULSORY ACQUISITION?

A:   The subscription period in the Compulsory Acquisition commences on [●] 2018 and expires on [●] 2018 at  [16:30] (CET) (the “Subscription Period”).

Songa Offshore shareholders who do not respond during the Subscription Period (or who fail to submit duly executed Subscription Forms to the Settlement Agent before the expiration of the Subscription Period) will receive the Cash Alternative. Shareholders who wish to receive the Cash Alternative will not be required to take any action in respect of the Compulsory Acquisition during the Subscription Period.

Q:  WHAT IS THE PROCEDURE FOR THE COMPULSORY ACQUISITION OF SONGA SHARES?

A:   Songa Offshore shareholders who wish to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition must complete and sign the Subscription Form enclosed with this Prospectus as Annex B and return it to the Settlement Agent prior to the expiration of the Subscription Period. Shareholders who wish to receive the Cash Alternative will not be required to take any action in respect of the Compulsory Acquisition during the Subscription Period.

Q: Can I withdraw my Subscription Form after submitting it and take the Cash Alternative rather than receiving New Consideration Shares and New Exchangeable Bonds?

A:  No. Once you have submitted a properly completed and executed Subscription Form, you may not withdraw your subscription.

Q:  CAN AFFECTED SONGA SHARES BE TRADED?

A:   No. By giving a duly executed Subscription Form to the Settlement Agent, Songa Offshore shareholders give an authorization to block the Songa Shares to which the Subscription Form relates, in favor of the Settlement Agent, who is authorized to transfer such Songa Shares to Transocean. As consideration for the contribution of Songa Shares, Transocean will issue the New Consideration Shares, cause TINC to issue the New Exchangeable Bonds and, in the case of (i) Songa Shareholders who do not respond during the Subscription Period or fail to submit a duly executed Subscription Form to the Settlement Agent before the expiration of the Subscription Period (the Cash Alternative), or (ii) in lieu of any fractional New Consideration Shares or New Exchangeable Bonds that would otherwise be issuable to any Songa Offshore shareholder, pay cash for the purposes of the settlement at the completion of the Compulsory Acquisition. It is not possible for shareholders to dispose of the Songa Shares when they are blocked, although such shareholders will, to the extent permitted under Norwegian and Cyprus law, remain the legal owners of

3


 

Table of Contents

their Songa Shares and retain voting rights and other shareholder rights associated with such tendered shares until settlement occurs. Additionally, Songa Offshore shareholders are free to dispose of any other securities not registered in the same VPS-account as the blocked Songa Shares. 

Q:  WHEN WILL THE CONSIDERATION FOR THE COMPULSORY ACQUISITION CONSIDERATION BE PAID?

A:   Transfer of the Songa Shares to the Settlement Agent (who is authorized to transfer the Songa Shares to Transocean), and delivery of the New Consideration Shares and New Exchangeable Bonds or the Cash Alternative will be made no later than 15 business days following the expiration of the Subscription Period.

The result of the Compulsory Acquisition is expected to be published no later than the next business day following the expiration of the Subscription Period.

Q:  HOW WILL THE SONGA SHARES HELD BY SONGA OFFSHORE SHAREHOLDERS WHO DO NOT RESPOND WITHIN THE SUBSCRIPTION PERIOD BE AFFECTED FOLLOWING THE COMPULSORY ACQUISITION?

A:   Songa Offshore shareholders who do not respond during the Subscription Period or who fail to submit a duly executed Subscription Form to the Settlement Agent before the expiration of the Subscription Period will not receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition and will receive the Cash Alternative.

For a more complete discussion on potential consequences in the event that you do not make an election in the Compulsory Acquisition, see “Risk Factors—Risks Factors Related to the Compulsory Acquisition.”

Q:  ARE APPRAISAL RIGHTS AVAILABLE IN THE COMPULSORY ACQUISITION?

A:  There are no appraisal rights relevant to the Compulsory Acquisition under Norwegian or Cyprus law.  However, Cyprus law provides for certain sell-out rights for the remaining Songa Offshore shareholders.  The remaining Songa Offshore shareholders have the right, within six months from the announcement of the consideration to be paid by Transocean to such shareholders and notified to Songa Offshore, to challenge the proposed purchase price at Cypriot Courts.  For more information, see “Comparison of Shareholder Rights—Appraisal Rights and Compulsory Acquisitions” and  “Comparison of Shareholder Rights—Approval of Business Combinations.”

Q:  WILL SONGA OFFSHORE SHAREHOLDERS BE OBLIGATED TO PAY ANY FEES OR COMMISSIONS TO EXCHANGE SONGA SHARES?

A:   Songa Offshore shareholders who hold their Songa Shares in Norwegian custody accounts will not incur any fees and expenses in connection with the Compulsory Acquisition (except for the costs of transmitting the declaration of acceptance to their custodian bank). 

4


 

Table of Contents

Q:  WILL SONGA OFFSHORE SHAREHOLDERS BE SUBJECT TO UNITED STATES FEDERAL INCOME TAX ON THE NEW CONSIDERATION SHARES, NEW EXCHANGEABLE BONDS AND THE CASH ALTERNATIVE?

A:   The exchange of Songa Shares for New Consideration Shares, New Exchangeable Bonds and, if applicable, the Cash Alternative pursuant to the Compulsory Acquisition will be a taxable transaction for United States federal income tax purposes. U.S. holders (as defined in “Material Tax Considerations—United States Taxation”) of Songa Shares generally will recognize gain or loss equal to the difference, if any, between (i) the sum of (A) the fair market value of any Shares received in exchange for such Songa Shares, determined in U.S. dollars, plus (B) the issue price, as determined for United States federal income tax purposes, of the New Exchangeable Bonds received in exchange for such Songa Shares, plus (C) the U.S. dollar amount of any cash received in Norwegian kroner in exchange for such Songa Shares, plus (D) any cash received in lieu of any fractional New Consideration Shares or New Exchangeable Bonds and (ii) such U.S. holder’s adjusted tax basis in the Songa Shares. Provided that Songa Offshore is not treated as a passive foreign investment company for U.S. federal income tax purposes, any gain or loss recognized upon the exchange generally will be treated as capital gain or loss.

A non-U.S. holder (as defined in “Material Tax Considerations—United States Taxation”) will generally not be subject to United States federal income tax on gain recognized on exchange of Songa Shares pursuant to the exchange offer unless the gain is “effectively connected” with the non-U.S. holder’s conduct of a trade or business in the United States or the non-U.S. holder is an individual present in the United States for 183 or more days in the taxable year of the exchange, and certain other requirements are met.

The foregoing is a brief summary of United States federal income tax consequences only and is qualified by the description of United States federal income tax considerations in “Material Tax Considerations—United States Taxation.” Tax matters are very complicated, and the tax consequences of the exchange offer to a particular holder will depend in part on such holder’s circumstances. Accordingly, holders of Songa Shares are urged to consult their own tax advisors for a full understanding of the tax consequences of the exchange offer to them, including the applicability of United States federal, state, local and foreign income and other tax laws.

Q:  WILL SONGA OFFSHORE SHAREHOLDERS BE SUBJECT TO NORWEGIAN TAXATION ON THE SHARES, NEW EXCHANGEABLE BONDS AND THE CASH ALTERNATIVE?

A:   The exchange of Songa Shares for New Consideration Shares, New Exchangeable Bonds or cash pursuant to the Compulsory Acquisition will be a taxable transaction for Norwegian income tax purposes for individual shareholders, while for corporate shareholders the transaction is expected to normally be tax exempt under the Norwegian exemption method. Norwegian individual holders (see “Material Tax Considerations—Norwegian Taxation—The Exchange of Songa Shares for Consideration”) of Songa Shares generally will recognize gain or loss equal to the difference, if any, between (i) the sum of (A) the fair market value of any New Consideration Shares received in exchange for such Songa Shares, determined in NOK, plus (B) the issue price, as determined for Norwegian income tax purposes, of the New Exchangeable Bonds received in the Compulsory Acquisition, plus (C) the amount of any cash received in Norwegian kroner received in the Compulsory Acquisition and (ii) such individual Norwegian holder’s tax

5


 

Table of Contents

basis in the Songa Shares exchanged. Any gain or loss recognized by a Norwegian holder in connection with the Compulsory Acquisition generally will be treated as capital gain or loss.

Songa Offshore shareholders who are presently also holders of Shares or, following the consummation of the Compulsory Acquisition, will become holders of Shares, may be taxed in Norway in connection with the receipt of future dividend income from Transocean (see “Material Tax Considerations—Norwegian Taxation—Dividend Distributions”) and the transfer of Shares (see “Material Tax Considerations—Norwegian Tax Considerations—Taxation of Gains on Disposals of Shares”), as well as interest earned and gains realized on the exchangeable bond.

Notwithstanding the description of certain aspects of taxation in Norway in “Material Tax Considerations—Norwegian Taxation,” shareholders may be liable to tax in other jurisdictions. In particular, shareholders with tax residency in Norway may be subject to an unlimited or limited tax liability in other jurisdictions, and shareholders that are subject to a limited tax liability in Norway may be liable to tax in the jurisdiction in which they are resident. A non-Norwegian holder will however generally not be subject to Norwegian income tax on gain recognized on the exchange of Songa Shares pursuant to the Compulsory Acquisition unless the gain is connected with the non-Norwegian holder’s conduct of or participation in a business activity managed or exercised in or out of Norway.

For a more complete description of certain Norwegian tax consequences of the Compulsory Acquisition, see “Material Tax Considerations—Norwegian Taxation.”

This summary is not intended to be a replacement for, nor should it be considered as, legal or tax advice. Shareholders of Songa Offshore are therefore strongly advised to consult their tax advisors regarding the tax consequences related to the Compulsory Acquisition and the holding and disposal of Shares. The specific tax situation of each shareholder can only be adequately addressed by individual tax advice.

Q:  WHAT PERCENTAGE OF TRANSOCEAN SHARES WILL FORMER HOLDERS OF SONGA SHARES OWN AFTER THE COMPULSORY ACQUISITION?

A:   The existing Transocean shareholders were diluted by approximately 27.7% as a consequence of the issuance of the Existing Consideration Shares and the Shares underlying the Existing Exchangeable Bonds that were  issued in the Voluntary Tender Offer and related transactions. The existing shareholders of Transocean may be further diluted by up to approximately 0.6% as a consequence of the Compulsory Acquisition and issuance of the New Consideration Shares to the Songa Offshore shareholders, assuming the issuance of approximately 1,599,589 Shares as New Consideration Shares and approximately USD 13,420,370 aggregate principal amount of New Exchangeable Bonds in the Compulsory Acquisition (which assumes that no Songa Offshore shareholder receives the Cash Alternative), based upon an exchange ratio of 0.35724 Shares to be issued for each Songa Share, and no additional capital increase by Songa Offshore is made after September 30, 2017.

6


 

Table of Contents

Q:  WILL THE NEW CONSIDERATION SHARES AND THE NEW EXCHANGEABLE BONDS ISSUED PURSUANT TO THE Compulsory Acquisition BE LISTED FOR TRADING?

A:   The Shares currently trade on the NYSE, and the New Consideration Shares will be listed on the NYSE.  To the extent that the New Exchangeable Bonds are treated as part of the same series of securities as the Existing Exchangeable Bonds for U.S. federal tax purposes, the New Exchangeable Bonds have been approved for listing on the New York Stock Exchange under the symbol “RIG/23”.  If the New Exchangeable Bonds are not treated as part of the same series of securities as the Existing Exchangeable Bonds for U.S. federal tax purposes, TINC intends to apply to list the New Exchangeable Bonds on The New York Stock Exchange.  The New Consideration Shares and New Exchangeable Bonds will not be listed on any stock exchange in Norway. See “Risk Factors—Risks Related to the Shares” and “Risk Factors—Risks Related to the New Exchangeable Bonds.”

Q:  SONGA OFFSHORE SUPPORT THE COMPULSORY ACQUISITION?

A:  Yes. As required by the rules of the Oslo Stock Exchange, in connection with the Voluntary Tender offer, the  Songa Offshore board of directors (the “Songa Board”) issued a statement in support of the Combination and the Voluntary Tender Offer on December 20, 2017, and a copy of the statement of the Songa Board  was included in the Voluntary Tender Offer S-4.  No further statement of the Songa Board is required to be rendered in connection with the Compulsory Acquisition.  The statement previously issued by the Songa Offshore Board is included in this Prospectus as Annex C for information only and should be read together with the disclosures set forth in the Voluntary Tender Offer S-4. In addition, the Songa Board obtained the independent statement of ABG Sundal Collier ASA (“ABG Sundal Collier”) regarding the Offer pursuant to Section 6-16 (4) of the Norwegian Securities Trading Act.  No independent statement is required to be rendered in connection with the Compulsory Acquisition.  The independent statement previously rendered by ABG Sundal Collier is included in this Prospectus as Annex D for information only and should be read together with the disclosures set forth in the Voluntary Tender Offer S-4.

Q:  WHAT IS THE MARKET VALUE OF SONGA SHARES AS OF A RECENT DATE?

A:  The closing price of Songa Shares on the Oslo Stock Exchange on January 31, 2018 was NOK 57.50.

Q:  IS TRANSOCEAN’S FINANCIAL CONDITION RELEVANT TO A SONGA OFFSHORE SHAREHOLDER’S DECISION ON THE FORM OF CONSIDERATION TO RECEIVE IN THE COMPULSORY ACQUISITION?

A:   Yes. Songa Offshore shareholders will receive New Consideration Shares and New Exchangeable Bonds or the Cash Alternative in exchange for their Songa Shares in the Compulsory Acquisition. Therefore, Songa Offshore shareholders should consider Transocean’s financial condition before deciding to become a Transocean shareholder and a bondholder. In considering Transocean’s financial condition, Songa Offshore shareholders should review information relating to Transocean in this Prospectus, including the financial information incorporated by reference in this Prospectus, which also contain detailed business, financial and other information about Transocean.

7


 

Table of Contents

Q:  WHERE CAN SONGA OFFSHORE SHAREHOLDERS FIND MORE INFORMATION ABOUT TRANSOCEAN AND SONGA OFFSHORE?

A:   Songa Offshore shareholders can find out information about Transocean and Songa Offshore from the sources described under “Where You Can Find More Information.” For certain information regarding Songa Offshore’s business and financial condition, see the sections of this Prospectus titled “Description of the Songa Offshore Business.”

Q:  WHO CAN SONGA OFFSHORE SHAREHOLDERS CONTACT WITH ADDITIONAL QUESTIONS ABOUT THE Compulsory Acquisition?  

A:   Songa Offshore shareholders can call the Settlement Agent with additional questions about the Compulsory Acquisition:

Clarksons Platou Securities AS

Munkedamsveien 62c

N‑0270 Oslo

Norway

+47 22 01 63 00

Email: ecm.oslo@clarksons.com

8


 

Table of Contents

SUMMARY

This summary highlights the material information in this Prospectus. To more fully understand the Compulsory Acquisition you should read carefully this entire document, including the exhibits, annexes, and documents incorporated by reference herein. For information on how to obtain these documents, see “Where You Can Find More Information.

The Combination (page 75)

On August 13, 2017, Transocean entered into the Transaction Agreement with Songa Offshore, pursuant to which we offered to acquire all of the Songa Shares (the “Combination”) through the Voluntary Tender Offer in exchange for consideration per Songa Share consisting of (i) 0.35724 newly issued shares of Transocean (the “Existing Consideration Shares”) and (ii) USD 2.99726 principal amount of 0.5% Exchangeable Senior Bonds due 2023, which are exchangeable into shares of the Company (the “Existing Exchangeable Bonds”), issued by TINC and guaranteed by Transocean. As part of the Voluntary Tender Offer, each Songa Offshore shareholder could instead elect to receive cash of NOK 47.50 per share of Songa Offshore up to a maximum of NOK 125,000 per shareholder (the “Cash Election”) in lieu of some or all of the Existing Consideration Shares and Existing Exchangeable Bonds such shareholder would otherwise have been entitled to receive in the Voluntary Tender Offer. The aggregate amount of consideration paid to each Songa Offshore shareholder accepting the Voluntary Tender Offer was comprised, as near as possible, of 50% Existing Consideration Shares and 50% Existing Exchangeable Bonds, with any exercise by such shareholder of the Cash Election, if elected, being deducted first from the aggregate number of Existing Exchangeable Bonds otherwise issuable to such shareholder and then from the aggregate number of Existing Consideration Shares such shareholder would otherwise have been entitled to receive in the Voluntary Tender Offer.

The Voluntary Tender Offer was completed on January 30, 2018 and we acquired Songa Shares representing 90% or more of the voting rights in Songa Offshore, so we are initiating this Compulsory Acquisition for the remaining Songa Shares not owned by Transocean.  Such Compulsory Acqisition is governed by article 36 of the Cyprus Takeover Bids Law (L.41(I)/2007), as amended.

Information About the Companies (see page 64)

Transocean Ltd.

Transocean Ltd. is the parent company of the Transocean Group of companies. Transocean was incorporated under the laws of Switzerland in 2008. Transocean has evolved to become a leading international provider of offshore contract drilling services for oil and gas wells. Transocean has approximately 5,820 employees worldwide.

Transocean’s registered and principal executive offices are located at Turmstrasse 30, CH‑6312 Steinhausen, Switzerland and its telephone number at that location is +41 (41) 749 0500.

Transocean Inc.

Transocean Inc. is a corporation incorporated under the Companies Law of the Cayman Islands. The legal and commercial name is Transocean Inc. TINC was established in 1999 and registered in the Cayman Islands under

9


 

Table of Contents

the business registration number 89645. TINC’s principal executive offices are located at P.O. Box 10342, 70 Harbour Drive, 4th Floor, Grand Cayman, KY1‑1003, and its telephone number is +1 345 745 4500.

Songa Offshore SE

Songa Offshore SE, the parent company of the Songa Offshore group of companies, is a European public company organized under the laws of the Republic of Cyprus. Its predecessor company, Songa Offshore ASA, was incorporated in 2005 as a Norwegian public limited liability company and converted to an SE, by means of a merger between Songa Offshore ASA and Songa Offshore Cyprus Plc, in 2008. The principal business of the Songa Group is to own and operate drilling rigs to be used in exploration and production drilling. The Songa Group operates in the international oil-service industry within the offshore drilling sector, and owns a fleet of seven semi-submersible rigs. The Songa Group has approximately 900 employees worldwide.

Songa Offshore’s registered and principal executive offices are located at the Porto Bello building, Office 201, No 1 Siafi Street, 3042, Limassol, Cyprus, and its telephone number at that location is +357 2520 7700.

Risk Factors (see page 26)

The Combination, including the Compulsory Acquisition, is subject to risks. You should carefully read and consider the risk factors in “Risk Factors” beginning on page 26.

Terms of the Compulsory Acquisition (see page 64)

The summary below describes the principal terms and conditions of the Compulsory Acquisition. Some of the terms and conditions described below are subject to important limitations and exceptions. You should carefully review “Terms of the Compulsory Acquisition” which contains a more detailed description of the terms and conditions to the Compulsory Acquisition.

 

 

 

Issuer of New Consideration Shares

Transocean Ltd.

Issuer of New Exchangeable Bonds

TINC

Target

Songa Offshore SE

Subject Matter of the Compulsory Acquisition

Transocean Ltd. is acquiring each of the remaining issued and outstanding Songa Shares.

Consideration

The Consideration per Songa Share will consist of a combination of the following:

1.    0.35724 New Consideration Shares; and

2.    USD 2.99726 principal amount of the New Exchangeable Bonds.

 

10


 

Table of Contents

 

 

 

 

Songa Offshore shareholders who do not respond during the Subscription Period (or who fail to submit duly executed Subscription Forms to the Settlement Agent before the expiration of the Subscription Period) will receive an amount in cash of NOK 47.50 per Songa Share in lieu of all of the New Consideration Shares and New Exchangeable Bonds such shareholder would otherwise be entitled to receive in the Compulsory Acquisition. If all remaining Songa Offshore shareholders (on a fully diluted basis as of January 30, 2018) elect to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition (and no Songa Offshore shareholders receive the Cash Alternative), approximately 1,599,589 New Consideration Shares and approximately USD 13,420,370 aggregate principal amount of New Exchangeable Bonds will be issued as a result of the Compulsory Acquisition.

 

 

Transocean will not issue any fractional New Consideration Shares or fractional amounts of New Exchangeable Bonds in the Compulsory Acquisition. Each Songa Offshore shareholder who elects to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition, and (a) who would otherwise be entitled to receive a fraction of a New Consideration Share will instead receive, for the fraction of a New Consideration Share, an amount in cash based on USD 8.39, the closing price of the Shares on the NYSE on August 14, 2017, the last trading day prior to the announcement of the Voluntary Tender Offer (the “Reference Price”), and (b) who would otherwise be entitled to receive a fractional amount of New Exchangeable Bonds will instead receive, for the fractional amount of New Exchangeable Bonds, an amount in cash based on USD 1,000, the principal amount per New Exchangeable Bond, and in each case, paid in NOK, based on an exchange rate of 7.9239 NOK per U.S. dollar which is the NOK/USD closing price at 4:00 p.m. CET as determined by Norges Bank, on August 14, 2017, the trading day immediately preceding the announcement of the Voluntary Tender Offer.

 

 

Adjustments to the Consideration

The number of New Consideration Shares and New Exchangeable Bonds shall each be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend and other like change (including any dividend or distribution of securities exchangeable into Shares). If an adjustment is made, Subscription Forms received prior to such adjustment shall be deemed a subscription of the Compulsory Acquisition as revised.

11


 

Table of Contents

Subscription Period

The subscription period in the Compulsory Acquisition commences on [●] 2018 and expires on [●] 2018 at [16:30] (CET) (the “Subscription Period”).

Shareholders of Songa Offshore who wish to receive New Consideration Shares and New Exchangeable Bonds in the Compulsory Acquisition must complete and sign the Subscription Form enclosed with this Prospectus as Annex B and return it to the Settlement Agent prior to the expiration of the Subscription Period.

Songa Offshore shareholders who do not respond during the Subscription Period (or who fail to submit duly executed Subscription Forms to the Settlement Agent before the expiration of the Subscription Period) will receive the Cash Alternative.  Shareholders who wish to receive the Cash Alternative will not be required to take any action in respect of the Compulsory Acquisition during the Subscription Period.

 

Settlement

The result of the Compulsory Acquisition is expected to be published no later than the next business day following the expiration of the Subscription Period in accordance with the procedures described under “Terms of the Compulsory Acquisition—Notices.”

 

 

Transfer of the Songa Shares to the Settlement Agent (who is authorized to transfer the Songa Shares to Transocean), and delivery of the New Consideration Shares and New Exchangeable Bonds or the Cash Alternative, will be made no later than 15 U.S. business days after the expiration of the Subscription Period. If the Subscription Period expires on or about [●] 2018, Transocean expects to issue and pay the New Consideration Shares and New Exchangeable Bonds or the Cash Alternative, as applicable, on or about [●] 2018.

 

 

Upon contribution of the Songa Shares to the Company, (i) the relevant number of New Consideration Shares and New Exchangeable Bonds will be deposited with Computershare, Inc., acting as paying and distribution agent for the Compulsory Acquisition (the “Distribution Agent”), and (ii) cash sufficient to pay the Cash Alternative and cash in lieu of fractional New Consideration Shares and New Exchangeable Bonds will be deposited with the Settlement Agent, in each case for distribution in accordance with the procedures described below to each Songa Offshore shareholder.

 

Songa Offshore shareholders remain bound by the Subscription Form until settlement has occurred.

Settlement Agent

Clarksons Platou Securities AS, Munkedamsveien 62c, N‑0270 Oslo, Norway, is the Settlement Agent in connection with the Compulsory Acquisition.

 

 

12


 

Table of Contents

Distribution Agent

Computershare, Inc., 250 Royall Street, Canton, Massachusetts 02021, is the Distribution Agent in connection with the Compulsory Acquisition.

 

Transocean’s Reasons for the Combination (see page 88)

At a meeting held on August 11, 2017, after due consideration and consultation, the board of directors of Transocean (the “Transocean Board”) unanimously approved (i) the total consideration of NOK 47.50 per Songa Share and (ii) the Combination and the transactions contemplated thereby. In reaching its determination, the Transocean Board considered a number of factors in connection with its evaluation of the proposed transaction, including significant strategic opportunities and potential synergies, as generally supporting its decision to enter into the Transaction Agreement and proceed with the transactions contemplated thereby. See “The Combination—Background and Reasons for the Combination—Transocean’s Reasons for the Combination” for a discussion of the factors considered by the Transocean Board.

Songa Offshore’s Reasons for the Combination (see page 91)

The Songa Board (with the exception of Songa Offshore directors Mr. Mohn and Mr. Mikkelsen, who were excused from voting on whether to approve the Transaction Agreement) unanimously determined to enter into the Transaction Agreement and recommend that Songa Offshore’s shareholders accept the Voluntary Tender Offer.  In addition to consulting with Songa Offshore management and its financial and legal advisors, the Songa Board considered a number of factors when evaluating the transaction. See “The Combination—Background and Reasons for the Combination—Songa Offshore’s Reasons for the Combination” for a discussion of the factors considered by the Songa Board.

The Transaction Agreement (see page 117)

The terms and conditions of the Combination were governed by the the Transaction Agreement, which is attached as Annex A to this Prospectus and incorporated into this Prospectus by reference. Transocean urges you to read the full text of the Transaction Agreement because it is the legal document between Transocean and Songa Offshore that governed the Combination.

Material Interests of Songa Offshore’s Board and Management in the Compulsory Acquisition (see page 117)

Following completion of the Voluntary Tender Offer, none of the members of the Songa Board other than Mark Bessel, and none of Songa Offshore’s executive officers owns any Songa Shares.  Other than Mr. Bessel, whose Songa shares will be part of the Compulsory Acquisition, no member of the Songa Board nor Songa Offshore’s executive officers will participate in the Compulsory Acquisition.

Comparison of Shareholders’ Rights (see page 203)

The rights of Transocean shareholders are governed by Swiss law and Transocean’s Articles of Association. In addition, Transocean is subject to the rules and regulations of the SEC and the NYSE that, among other things, regulate the solicitation of proxies and provide for additional shareholder rights requirements. The rights of Songa Offshore shareholders are governed by Cyprus law and Songa Offshore’s memorandum of association and articles of association (“Songa’s Articles of Association”). Copies of Transocean’s Articles of Association

13


 

Table of Contents

and Songa’s Articles of Association are available, without charge, by following the instructions listed under “Where You Can Find More Information.”

As a result of the Compulsory Acquisition, holders of Songa Shares who elect to receive New Consideration Shares will become shareholders of Transocean and their rights as shareholders will be governed by Swiss law and Transocean’s Articles of Association. There are many differences between the rights of Songa Offshore shareholders and those of Transocean shareholders.

Material Tax Considerations of the Compulsory Acquisition (see page 235)

Tax matters are very complicated, and the tax consequences of the Compulsory Acquisition to a particular holder will depend in part on such holder’s circumstances. Accordingly, holders of Songa Shares are urged to consult their own tax advisors for a full understanding of the tax consequences of the Compulsory Acquisition to them, including the applicability of United States federal, state, local and foreign income and other tax laws.

Certain Material U.S. Income Tax Considerations

The exchange of Songa Shares for New Consideration Shares, New Exchangeable Bonds or cash pursuant to the Compulsory Acquisition pursuant to the Compulsory Acquisition will be a taxable transaction for United States federal income tax purposes. U.S. holders of Songa Shares that participate in the Compulsory Acquisition generally will recognize gain or loss equal to the difference, if any, between (i) the sum of (A) the fair market value of any New Consideration Shares received in the Compulsory Acquisition, determined in U.S. dollars, plus (B) the issue price, as determined for United States federal income tax purposes, of the New Exchangeable Bonds received in the Compulsory Acquisition, plus (C) the U.S. dollar amount of any cash received in Norwegian kroner in the Compulsory Acquisition, plus (D) any cash received for any fractional New Consideration Shares or New Exchangeable Bonds and (ii) such U.S. holder’s adjusted tax basis in the Songa Shares exchanged. Provided that Songa Offshore is not treated as a passive foreign investment company for U.S. federal income tax purposes, any gain or loss recognized by a U.S. holder in connection with the Compulsory Acquisition generally will be treated as capital gain or loss.

A non-U.S. holder will generally not be subject to United States federal income tax on gain recognized on the exchange of Songa Shares pursuant to the Compulsory Acquisition unless the gain is “effectively connected” with the non-U.S. holder’s conduct of a trade or business in the United States or the non-U.S. holder is an individual present in the United States for 183 or more days in the taxable year of the exchange, and certain other requirements are met.

The foregoing is a brief summary of United States federal income tax consequences only and is qualified by the description of United States federal income tax considerations in “Material Tax Considerations—United States Taxation.”

Certain Material Norwegian Tax Considerations

The exchange of Songa Shares for New Consideration Shares, New Exchangeable Bonds or cash pursuant to the Compulsory Acquisition will be a taxable transaction for Norwegian income tax purposes for individual shareholders, while for corporate shareholders the transaction is expected to normally be tax exempt under the

14


 

Table of Contents

Norwegian exemption method. Norwegian individual holders of Songa Shares that participate in the Compulsory Acquisition generally will recognize gain or loss equal to the difference, if any, between (i) the sum of (A) the fair market value of any New Consideration Shares received in the Compulsory Acquisition, determined in NOK, plus (B) the issue price, as determined for Norwegian income tax purposes, of the New Exchangeable Bonds received in the Compulsory Acquisition, plus (C) the amount of any cash received in Norwegian kroner received in the Compulsory Acquisition and (ii) such individual Norwegian holder’s tax basis in the Songa Shares exchanged. Any gain or loss recognized by a Norwegian holder in connection with the Compulsory Acquisition generally will be treated as capital gain or loss.

A non-Norwegian holder will generally not be subject to Norwegian income tax on gain recognized on the exchange of Songa Shares pursuant to the Compulsory Acquisition unless the gain is connected with the non-Norwegian holder’s conduct of or participation in a business activity managed or exercised in or out of Norway.

The foregoing is a brief summary of Norwegian tax consequences only and is qualified by the description of Norwegian tax considerations in “Material Tax Considerations—Norwegian Taxation.”

Certain Material Swiss Tax Considerations

The exchange of Songa Shares for the Consideration is not subject to Swiss Federal withholding tax. The exchange of Songa Shares for the Consideration may be subject to Swiss securities transfer tax of up to 0.3 per cent. If such transfer tax will be due, it will be borne by Transocean.

The foregoing is a brief summary of Swiss tax consequences only and is qualified by the description of Swiss tax considerations in “Material Tax Considerations—Swiss Taxation.”

Terms of the New Exchangeable Bonds

The following overview provides a summary of the main terms applicable to the New Exchangeable Bonds. The full terms in respect of the New Exchangeable Bonds are described in further detail under “Description of Transocean New Exchangeable Bonds.”

 

 

Issuer

Transocean Inc.

Guarantor

Transocean Ltd.

 

Securities Offered

0.5% Exchangeable Senior Bonds due 2023.

Currency

USD.

ISIN/CUSIP

The New Exchangeable Bonds will be registered under the ISIN/CUSIP US893830BJ77 / 893830 BJ7 unless the New Exchangeable Bonds are not treated as part of the same series of securities as the Existing Exchangeable Bonds for U.S. federal tax purposes, in which case a different ISIN / CUSIP will be obtained.

 

15


 

Table of Contents

Interest Rate/Yield

0.5% per annum. Interest on the New Exchangeable Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

 

Maturity Date

January 30, 2023.

 

 

Permitted Denominations

USD 1,000.

 

 

 

Amortization

Amortization in full on the Maturity Date.

Ranking

The New Exchangeable Bonds will constitute senior unsecured debt of TINC and will rank:

●    equally with its senior unsecured debt from time to time outstanding;

●    senior to its subordinated debt from time to time outstanding; and

●    effectively junior to its secured debt and to all debt and other liabilities of its subsidiaries from time to time outstanding.

Transocean’s guarantee will rank equally with all of its other unsecured and subordinated debt from time to time outstanding.

Guarantee

All present and future obligations of TINC under the New Exchangeable Bonds are guaranteed in full by Transocean. The guarantee is unconditional.

 

Principal Amount

Up to USD 13,421,000 being offered in the Compulsory Acquisition. Together with the Existing Exchangeable Bonds currently outstanding, up to an aggregate USD 867,225,000 will be outstanding following completion of the Compulsory Acquisition.

 

Interest Payment Dates

January 30 and July 30 of each year, beginning July 30, 2018.

 

16


 

Table of Contents

 

 

Exchange Rights

Unless previously exchanged, purchased or cancelled, holders may exchange their New Exchangeable Bonds at the applicable exchange rate for the Shares at any time after the initial issue date and prior to the close of business on the business day immediately preceding the maturity date. The Shares are listed on the NYSE under the symbol “RIG.”

Additional Amounts

Subject to specified exceptions, if the issuer or guarantor is required by law to withhold any tax from any payment in respect of the New Exchangeable Bonds the amount of the payment due will be grossed up to such amount as is (after giving effect to the required withholding) equal to the payment that would have been received if no withholding had been required.

If a Tax Event (as defined below) occurs and a holder of the New Exchangeable Bonds does not elect to exchange, or cause repurchase of, its New Exchangeable Bonds following such Tax Event, neither Transocean nor TINC will be required to pay additional amounts with respect to payments made in respect of such New Exchangeable Bonds following such Tax Event, and all subsequent payments in respect of such New Exchangeable Bonds will be subject to any tax required to be withheld or deducted under the laws of a relevant taxing jurisdiction.

Exchange Rate

The exchange rate will be 97.29756 Shares per USD 1,000 principal amount of New Exchangeable Bonds, subject to adjustment as described below.

Exchange Settlement

Transocean will settle each USD 1,000 principal amount of New Exchangeable Bonds surrendered for exchange by delivering, on the third trading day immediately following the exchange date (or, in the case of an exchange in connection with a Fundamental Change (as defined below), on the fifth trading day immediately following the exchange date), a number of Shares equal to the exchange rate in effect on the exchange date. Cash will be delivered in lieu of any fractional shares.

Adjustments to Exchange Rate

The exchange rate will be adjusted in the following circumstances:

If a holder elects to exchange its New Exchangeable Bonds in connection with a Fundamental Change (as defined below) or a Tax Event (as defined below), the exchange rate applied to that exchange will be increased based on the make-whole premium applicable to the Fundamental Change or Tax Event.

For exchanges in connection with a Fundamental Change due to a Change of Control (as defined below), the increased exchange rate will be determined as follows:

 

17


 

Table of Contents

 

COCER         =       OER x (1 +(EP x (c/t))), where

 

 

COCER    =       Exchange Rate applicable to exchanges in connection with the applicable Change of Control

OER         =       Exchange Rate otherwise applicable at such time, before giving effect to the increase resulting from the applicable Change of Control

EP             =       22.50%

c               =       the number of days from and including the date of the Fundamental Change to but excluding the maturity date

t                =       the number of days from and including the issue date to but excluding the maturity date

For exchanges in connection with a Fundamental Change due to a Listing Failure Event, the increased exchange rate will be determined as follows:

 

 

LFER            =      OER x (1 +(EP x (c/t))), where

 

 

LFER       =       Exchange Rate applicable to exchanges in connection with the applicable Listing Failure Event

OER         =       Exchange Rate otherwise applicable at such time, before giving effect to the increase resulting from the applicable Listing Failure Event

EP            =       22.50%

 

c               =       the number of days from and including the date of the listing failure event to but excluding the maturity date

t                =       the number of  days from and including the issue date to but excluding the maturity date

 

 

For exchanges in connection with a Tax Event, the number of additional shares will be determined as follows:

 

 

TEER            =      OER x (1 +(EP x (c/t))), where

 

18


 

Table of Contents

 

TEER       =       Exchange Rate applicable to exchanges in connection with the applicable Tax Event

OER         =       Exchange Rate otherwise applicable at such time, before giving effect to the increase resulting from the applicable Tax Event

EP            =       22.50%

c               =       the number of days from and including the date of the Tax Event to but excluding the maturity date

t                =       the number of  days from and including the issue date to but excluding the maturity date

 

The indenture also includes customary exchange rate adjustments for certain corporate events, including dividends, stock splits and recapitalizations of the guarantor.

Redemption of the New Exchangeable Bonds at TINC’s Option

TINC will have no option to redeem the New Exchangeable Bonds.

Repurchase of the New Exchangeable Bonds at the Option of the Holder

Holders of the New Exchangeable Bonds will have the right to require TINC to repurchase all or a portion of such holder’s New Exchangeable Bonds upon a Fundamental Change or upon the occurrence of certain adverse changes in tax laws resulting in a Tax Event Offer to Repurchase.

In the event of a Fundamental Change due to a Change of Control Event, New Exchangeable Bonds will be repurchased at a price in cash equal to 101% of the principal amount of the New Exchangeable Bonds to be repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date.

In the event of a Fundamental Change due to a Listing Failure Event, or of a Tax Event Offer to Repurchase, New Exchangeable Bonds will be repurchased at a price in cash equal to 100% of the principal amount of the New Exchangeable Bonds to be repurchased, plus any accrued and unpaid interest to, but excluding, the repurchase date. 

In the event of any repurchase due to a Fundamental Change, settlement of any exchange will be five business days following the exchange date.

19


 

Table of Contents

Use of Proceeds

Neither Transocean nor TINC will receive any cash proceeds from the Compulsory Acquisition.  The New Exchangeable Bonds will serve as consideration for Transocean Inc.’s acquisition of Songa Shares in the Compulsory Acquisition.

 

 

 

Global  Form

The New Exchangeable Bonds issued in the Compulsory Acquisition will be evidenced by one or more global securities deposited with the trustee as custodian for DTC. The global securities will be registered in the name of Cede & Co., as DTC’s nominee.

Material U.S. Federal Income Tax Considerations

You should consult your tax advisor with respect to the U.S. federal income tax consequences of owning the New Exchangeable Bonds and the Shares into which the New Exchangeable Bonds may be exchanged in light of your own particular situation and with respect to any tax consequences arising under the laws of any state, local, foreign or other taxing jurisdiction. See “Material Tax Considerations.”

Listing of the New Exchangeable Bonds

To the extent that the New Exchangeable Bonds are treated as part of the same series of securities as the Existing Exchangeable Bonds for U.S. federal tax purposes, the New Exchangeable Bonds have been approved for listing on the New York Stock Exchange under the symbol “RIG/23”.  If the New Exchangeable Bonds are not treated as part of the same series of securities as the Existing Exchangeable Bonds for U.S. federal tax purposes, TINC intends to apply to list the New Exchangeable Bonds on The New York Stock Exchange. 

The guarantor’s shares are listed for trading on The New York Stock Exchange under the ticker symbol “RIG.”

 

 

Co-Trustees.

Computershare Trust Company, N.A. and Computershare Trust Company of Canada. The Co-Trustees are not a representative of the holders of the New Exchangeable Bonds.  The Co-Trustees will act only in accordance with the requirements of the indenture governing the Existing Exchangeable Bonds and New Exchangeable Bonds.

Governing Law and Jurisdiction

New York law will govern the indenture and the New Exchangeable Bonds.

 

20


 

Table of Contents

SUMMARY SELECTED FINANCIAL DATA OF TRANSOCEAN

The selected financial data as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 have been derived from the audited consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of Transocean’s annual report on Form 10‑K for the year ended December 31, 2016 (the “2016 Annual Report”). The selected financial data as of December 31, 2014, 2013 and 2012, and for each of the two years in the period ended December 31, 2013 have been derived from Transocean’s accounting records. The selected financial data as of September 30, 2017 and for the nine-month periods ended September 30, 2017 and 2016 have been derived from the unaudited condensed consolidated financial statements included in “Item 1. Financial Statements” of Transocean’s quarterly report on Form 10‑Q for the quarterly period ended September 30, 2017 (the “3Q17 Quarterly Report”).

The selected financial data should be read in conjunction with the sections titled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and the notes thereto included under “Item 8. Financial Statements and Supplementary Data” of the 2016 Annual Report, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the unaudited condensed consolidated financial statements and notes thereto included in “Item 1. Financial Statements” of the 3Q17 Quarterly Report and Transocean’s financial statements and related notes and other financial information incorporated by reference in this Prospectus.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended
September 30,

 

Years ended December 31,

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

    

2017

    

2016

    

2016(1)

    

2015

    

2014(2)

    

2013

    

2012

 

 

 

(In millions of U.S. dollars, except per share data)

 

Statement of operations data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

2,344

 

$

3,187

 

$

4,161 

 

$

7,386 

 

$

9,185 

 

$

9,246 

 

$

8,942 

 

Operating income (loss)

 

 

(2,516)

 

 

816

 

 

1,132 

 

 

1,365 

 

 

(1,347)

 

 

2,203 

 

 

1,588 

 

Income (loss) from continuing operations

 

 

(2,995)

 

 

570

 

 

827 

 

 

895 

 

 

(1,880)

 

 

1,428 

 

 

765 

 

Net income (loss)

 

 

(2,995)

 

 

570

 

 

827 

 

 

897 

 

 

(1,900)

 

 

1,437 

 

 

(278)

 

Net income (loss) attributable to controlling interest

 

 

(3,016)

 

 

535

 

 

778 

 

 

865 

 

 

(1,839)

 

 

1,434 

 

 

(291)

 

Per share earnings (loss) from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(7.72)

 

$

1.44

 

$

2.08 

 

$

2.36 

 

$

(5.02)

 

$

3.92 

 

$

2.11 

 

Diluted

 

 

(7.72)

 

 

1.44

 

 

2.08 

 

 

2.36 

 

 

(5.02)

 

 

3.92 

 

 

2.11 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet data (at end of period)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

22,441

 

 

 

 

$

26,889 

 

$

26,431 

 

$

28,676 

 

$

32,759 

 

$

34,534 

 

Debt due within one year

 

 

799

 

 

 

 

 

724 

 

 

1,093 

 

 

1,032 

 

 

323 

 

 

1,365 

 

Long-term debt

 

 

6,501

 

 

 

 

 

7,740 

 

 

7,397 

 

 

9,019 

 

 

10,329 

 

 

11,035 

 

Total equity

 

 

12,803

 

 

 

 

 

15,805 

 

 

15,000 

 

 

14,104 

 

 

16,719 

 

 

15,803 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other financial data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

887

 

$

1,278

 

$

1,911 

 

$

3,445 

 

$

2,220 

 

$

1,918 

 

$

2,708 

 

Cash used in investing activities

 

 

(46)

 

 

(1,056)

 

 

(1,313)

 

 

(1,932)

 

 

(1,828)

 

 

(1,658)

 

 

(389)

 

Cash provided by (used in) financing activities

 

 

(1,176)

 

 

(27)

 

 

115 

 

 

(1,809)

 

 

(1,000)

 

 

(2,151)

 

 

(1,202)

 

Capital expenditures

 

 

386

 

 

1,072

 

 

1,344 

 

 

2,001 

 

 

2,165 

 

 

2,238 

 

 

1,303 

 

Distributions of qualifying additional paid-in capital

 

 

 

 

 

 

 

 

381 

 

 

1,018 

 

 

606 

 

 

276 

 

Per share distributions of qualifying additional paid-in capital

 

 

 

 

 

 

 

 

1.05 

 

 

2.81 

 

 

1.68 

 

 

0.79 

 


(1)

In December 2016, as contemplated by the Agreement and Plan of Merger, dated July 31, 2016 (the “2016 Agreement and Plan of Merger”), Transocean Partners LLC (“Transocean Partners”) and one of our subsidiaries completed the merger, with Transocean Partners becoming a wholly owned indirect subsidiary of Transocean. Each Transocean Partners common unit that was issued and outstanding immediately prior to the closing, other than units held by Transocean and its subsidiaries, was converted into the right to receive 1.20 of our shares. To complete the merger, we issued 23.8 million shares from conditional capital.

(2)

In August 2014, Transocean completed an initial public offering to sell a noncontrolling interest in Transocean Partners, which was formed on February 6, 2014, by Transocean Partners Holdings Limited, a Cayman Islands company and our wholly owned subsidiary.

 

21


 

Table of Contents

UNAUDITED PER SHARE DATA

The table below summarizes unaudited per share information for Transocean on a historical basis. You should read the information below together with the financial statements and related notes of Transocean incorporated by reference.

The information below is being provided for informational purposes only. You should not rely on this historical information as being indicative of the future results of operations data as of any future date or for any future period. The historical net book value per share is computed by dividing total shareholders’ equity by the number of shares outstanding at the end of the period.

 

 

 

 

 

 

 

 

 

    

Nine months ended
September 30, 2017

    

Year ended
December 31, 2016

 

Transocean historical per share data

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

(7.72)

 

$

2.08 

 

Diluted earnings (loss) per share

 

$

(7.72)

 

$

2.08 

 

Cash dividends declared per share

 

$

 

$

 

Net book value per share (at end of period)

 

$

32.72

 

$

40.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22


 

Table of Contents

COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION

Comparative Historical Market Price Information

The Shares are listed for trading on the NYSE under the symbol “RIG.” Songa Shares are listed for trading on the Oslo Stock Exchange under the symbol “SONG.”

The following table sets forth the high and low reported sale prices for Shares and Songa Shares, as well as the dividends declared for the shares of each, as applicable, for the periods shown as reported on the NYSE or the Oslo Stock Exchange, respectively.

As of January 31, 2018, there were 458,175,417 shares of Transocean outstanding, which excludes 3,556,077 issued shares that are held by Transocean or its subsidiaries. As of January 31, 2018, there were 191,865,592 Songa Shares outstanding of which 187,390,391 shares (represents 97.67%) were owned by Transocean. As of such dates, Transocean had 6,002 shareholders of record and Songa Offshore had 2,999 shareholders of record.

 

 

Transocean ($)

 

Songa Offshore (NOK)(1)

 

 

    

High

    

Low

    

Dividend
paid
per share

    

High

    

Low

    

Dividend
paid
per share

 

Year Ended December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter (through January 31, 2018)

 

12.40

 

10.59

 

 

65.00

 

56.00

 

 

Year Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

16.16 

 

11.69 

 

 

33.70 

 

30.70 

 

 

Second Quarter

 

13.04 

 

7.67 

 

 

32.80 

 

28.00 

 

 

Third Quarter 

 

10.84 

 

7.20 

 

 

57.00 

 

31.00 

 

 

Fourth Quarter

 

11.78

 

9.33

 

 

65.00

 

51.50

 

 

Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

13.48 

 

7.67 

 

 

121.00 

 

29.00 

 

 

Second Quarter

 

12.05 

 

8.34 

 

 

41.00 

 

15.00 

 

 

Third Quarter

 

13.03 

 

8.68 

 

 

35.00 

 

17.00 

 

 

Fourth Quarter

 

16.66 

 

9.1 

 

 

33.50 

 

18.00 

 

 


(1)

2015 and 2016 share prices adjusted for December 2016 100:1 reverse share split.

 

Dividends

Transocean

All Shares have equal rights to dividends. The holders of Shares are entitled to receive dividends as are lawfully declared on Shares by a general meeting of Transocean’s shareholders. No cash dividends were paid on Shares during the first nine months of 2017 or during fiscal years 2016 and 2015. Transocean’s ability to pay future cash dividends will (a) depend on our results of operations, financial condition, cash requirements and other relevant factors, (b) be subject to shareholder approval, (c) be subject to restrictions contained in our credit facilities and other debt covenants, (d) be affected by our plans regarding share repurchases or noncash shareholder distributions and (e) be subject to restrictions imposed by Swiss law, including the requirement that sufficient distributable profits from the previous year or freely distributable reserves must exist. Transocean does not expect to pay cash dividends in the foreseeable future.

23


 

Table of Contents

Songa Offshore

All shares in Songa Offshore have equal rights to dividends. Pursuant to Regulation 112 of Songa’s Articles of Association and provided that Songa Offshore has sufficient distributable profits, Songa Offshore may, at a general meeting of its shareholders, declare by ordinary resolution (simple majority) dividends to be paid out of profits and to be distributed to the shareholders pro rata based on their holdings in Songa Offshore but no dividend will exceed the amount recommended by the Songa Board. The Songa Board may declare interim dividends as appear to the Songa Board to be justified by the profits of Songa Offshore (Regulation 113 of Songa’s Articles of Association). Songa Offshore’s current ability to pay dividends is restricted by contractual arrangements including restrictions under its different loan agreements. Over time, when and as Songa Offshore has adequate financial resources, declaration of dividends will be considered by the Songa Board. Songa Offshore has not paid any dividends for any of the years from 2010 to 2016.

Recent and Comparative Market Price Information

The following table sets forth the closing sale price per Share and Songa Share as reported on the NYSE and the Oslo Stock Exchange, respectively, as of August 14, 2017, the last trading day before the public announcement of the contemplated Compulsory Acquisition, and as of January 31, 2018, the most recent practicable trading day prior to the date of this Prospectus. The table also shows the implied value of the consideration proposed for each Songa Share as of the same dates which amounts are calculated by multiplying the closing sales prices for Shares by 0.7145, representing the approximate per share value of the Consideration that a Songa Offshore shareholder will be entitled to receive as of such dates, in exchange for each Songa Share they hold at the effective time of the Compulsory Acquisition.

The market prices of Shares and Songa Shares fluctuate, and the value of the Consideration will fluctuate with the market price of the Shares. No assurance can be given concerning the market prices of Shares and Songa Shares before the completion of the Combination or Shares after the completion of the Compulsory Acquisition. Because the exchange ratio is fixed in the Transaction Agreement, the market value of the Shares that Songa Offshore shareholders will receive in connection with the Compulsory Acquisition may vary significantly from the prices shown in the table below. Accordingly, you are urged to obtain current market quotations of Shares and Songa Shares before making any decision with respect to the proposals in this Prospectus.

 

 

 

 

 

 

 

 

 

 

 

    

Transocean
shares (close)

    

Songa Offshore
shares (close)

    

Equivalent per share
value

 

August 14, 2017

 

$

8.39 

 

NOK 34.00

 

$

5.99 

 

January 31,  2018

 

$

10.79

 

NOK 57.50

 

$

7.71 

 

 

24


 

Table of Contents

Exchange Rates

The following tables show for the years ended December 31, 2013 through December 31, 2017, the low, high, average and period exchange rate U.S. dollars per Norwegian krone.

 

 

Exchange Rates

 

Year

    

Low

    

High

    

Average(1)

    

Period End

 

 

 

(One U.S. dollar per NOK)

 

2013

 

5.4438 

 

6.2154 

 

5.8768 

 

6.0837 

 

2014

 

5.8611 

 

7.6111 

 

6.3018 

 

7.4332 

 

2015

 

7.3593 

 

8.8090 

 

8.0739 

 

8.8090 

 

2016

 

7.9766 

 

8.9578 

 

8.3987 

 

8.6200 

 

2017

 

7.7121

 

8.6781

 

8.2630

 

8.2050

 


(1)

The average of the rates on the last business day of each month during the applicable period.

The table below shows the high and low noon buying rates in U.S. dollars for Norwegian kroner for each month during the six months prior to the date of this Prospectus:

 

 

 

 

 

 

Month(1)

    

Low

    

High

 

August

 

7.7233

 

7.9603

 

September

 

7.7916

 

7.9629

 

October

 

7.8789

 

8.1811

 

November

 

8.1288

 

8.2929

 

December

 

8.1819

 

8.3807

 

January

 

7.6678

 

8.1304

 


(1)

The average of the daily rates on each business day during the applicable period.

The rates presented above may differ from the actual rates used in the preparation of Transocean’s financial statements and other financial information appearing in this document. Our inclusion of such rates is not meant to suggest that the U.S. dollar amounts actually represent Norwegian kroner amounts or that such amounts could have been converted to U.S. dollars at any particular rate, if at all.

 

 

25


 

Table of Contents

RISK FACTORS

An investment in the Company and TINC involves risks. Before making an investment decision with respect to the Compulsory Acquisition and the Company, investors should carefully consider the risk factors and all information contained in this Prospectus, including the financial statements and related notes incorporated herein by reference. The risks and uncertainties described in this section are the principal known risks and uncertainties faced by the Group as of the date hereof that the Company believes are material to an investment in the Company. The absence of negative past experience associated with any given risk does not mean that the risks and uncertainties described herein should not be considered prior to making an investment decision in respect of the Company. If any of the following risks were to materialize, individually or together with other circumstances, they could have a material and adverse effect on the Group or its business, financial condition, results of operations, cash flows or prospects, which could cause a decline in the value and trading price of the Shares, the Existing Exchangeable Bonds and/or New Exchangeable Bonds, resulting in the loss of all or part of an investment in the same. The order in which the risks are presented does not reflect the likelihood of their occurrence or the magnitude of their potential impact on the Group’s business, financial condition, results of operations, cash flows or prospects.

Risks Related to the Business of the Group

The Group’s drilling contracts may be terminated due to a number of events, and, during depressed market conditions, the Group’s customers may seek to repudiate or renegotiate their contracts

Certain of the Group’s drilling contracts with customers may be cancellable at the option of the customer upon payment of an early termination payment. Such payments may not, however, fully compensate the Group for the loss of the contract. Drilling contracts also customarily provide for either automatic termination or termination at the option of the customer typically without the payment of any termination fee, under various circumstances such as non-performance, as a result of significant downtime or impaired performance caused by equipment or operational issues, or sustained periods of downtime due to force majeure events. Many of these events are beyond the Group’s control. During periods of depressed market conditions, the Group is subject to an increased risk of the Group’s customers seeking to repudiate their contracts, including through claims of non-performance.  The Group is at continued risk of experiencing early contract terminations in the current weak commodity price environment as operators look to reduce their capital expenditures. During the years ended December 31, 2017, 2016 and 2015, the Transocean Group’s customers early terminated or cancelled contracts for one, eight and five of the Transocean Group’s rigs, respectively, and these rigs currently remain idle. The Transocean Group’s customers’ ability to perform their obligations under their drilling contracts, including their ability to fulfill their indemnity obligations to the Group, also may be negatively impacted by an economic downturn. The Group’s customers, which include national oil companies, often have significant bargaining leverage over the Group. If customers cancel some of the Group’s contracts, and the Group is unable to secure new contracts on a timely basis and on substantially similar terms, or if contracts are suspended for an extended period of time or if a number of the contracts are renegotiated, it could adversely affect the Group’s consolidated statement of financial position, results of operations or cash flows.

26


 

Table of Contents

The Group’s current backlog of contract drilling revenue may not be fully realized, which may have a material adverse impact on the Group’s consolidated statement of financial position, results of operations or cash flows

At October 26, 2017, the Transocean Group’s contract backlog was approximately USD 9.4 billion. This amount represents the firm term of the drilling contract multiplied by the contractual operating rate, which may be higher than the actual day rate the Group receives or the Group may receive other day rates included in the contract, such as waiting on weather rate, repair rate, standby rate or force majeure rate. The contractual operating day rate may also be higher than the actual day rate the Group receives because of a number of factors, including rig downtime or suspension of operations.

Several factors could cause rig downtime or a suspension of operations, including:

·

breakdowns of equipment and other unforeseen engineering problems;

·

work stoppages, including labor strikes;

·

shortages of material and skilled labor;

·

surveys by government and maritime authorities;

·

periodic classification surveys;

·

severe weather, strong ocean currents or harsh operating conditions; and

·

force majeure events.

In certain drilling contracts, the day rate may be reduced to zero or result in customer credit against future day rate if, for example, repairs extend beyond a stated period of time. The Group’s contract backlog includes signed drilling contracts and, in some cases, other definitive agreements awaiting contract execution. The Group may not be able to realize the full amount of the Group’s contract backlog due to events beyond the Group’s control. In addition, some of the Group’s customers have experienced liquidity issues in the past and these liquidity issues could be experienced again if commodity prices decline to lower levels for an extended period of time. Liquidity issues and other market pressures could lead the Group’s customers to go into bankruptcy or could encourage the Group’s customers to seek to repudiate, cancel or renegotiate these agreements for various reasons (see above “—The Group’s drilling contracts may be terminated due to a number of events, and, during depressed market conditions, the Group’s customers may seek to repudiate or renegotiate their contracts”). The Group’s inability to realize the full amount of the Group’s contract backlog may have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows.

The Group’s operating and maintenance costs will not necessarily fluctuate in proportion to changes in the Group’s operating revenues

The Group’s operating and maintenance costs will not necessarily fluctuate in proportion to changes in the Group’s operating revenues. Costs for operating a rig are generally fixed or only semi-variable regardless of the day rate being earned. In addition, should the Group’s rigs incur unplanned downtime while on contract or idle time between drilling contracts, the Group will not always reduce the staff on those rigs because the Group

27


 

Table of Contents

could use the crew to prepare the rig for its next contract. During times of reduced activity, costs reductions may not be immediate because portions of the crew may be required to prepare rigs for stacking, after which time the crew members may be assigned to active rigs or released. As the Group’s rigs are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. In general, labor costs increase primarily due to higher salary levels and inflation. Equipment maintenance costs fluctuate depending upon the type of activity the unit is performing and the age and condition of the equipment, and these costs could increase for short or extended periods as a result of regulatory or customer requirements that raise maintenance standards above historical levels. Contract preparation costs vary based on the scope and length of contract preparation required and the duration of the firm contractual period during which such expenditures are amortized.

The Group’s business involves numerous operating hazards, and the Group’s insurance and indemnities from its customers may not be adequate to cover potential losses from the Group’s operations

The Group’s operations are subject to the usual hazards inherent in the drilling of oil and gas wells, such as, blowouts, reservoir damage, loss of production, loss of well control, lost or stuck drill strings, equipment defects, craterings, fires, explosions and pollution. Contract drilling requires the use of heavy equipment and exposure to hazardous conditions, which may subject the Group to liability claims by employees, customers and other parties. These hazards can cause personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage, claims by third parties or customers and suspension of operations. The Group’s offshore fleet is also subject to hazards inherent in marine operations, either while on site or during mobilization, such as capsizing, sinking, grounding, collision, piracy, damage from severe weather and marine life infestations.

The South China Sea, the Northwest Coast of Australia and the U.S. Gulf of Mexico area are subject to typhoons, hurricanes or other extreme weather conditions on a relatively frequent basis, and the Group’s drilling rigs in these regions may be exposed to damage or total loss by these storms, some of which may not be covered by insurance. The occurrence of these events could result in the suspension of drilling operations, damage to or destruction of the equipment involved and injury to or death of rig personnel. Some experts believe global climate change could increase the frequency and severity of these extreme weather conditions. Operations may also be suspended because of machinery breakdowns, abnormal drilling conditions, subcontractors’ failure to perform or supply goods or services, or personnel shortages. The Group customarily provides contract indemnity to the Group’s customers for certain claims that could be asserted by the Group relating to damage to or loss of the Group’s equipment, including rigs, and claims that could be asserted by the Group or the Group’s employees relating to personal injury or loss of life.

Damage to the environment could also result from the Group’s operations, particularly through spillage of hydrocarbons, fuel, lubricants or other chemicals and substances used in drilling operations, or extensive uncontrolled fires. The Group may also be subject to property damage, environmental indemnity and other claims by oil and natural gas companies. Drilling involves certain risks associated with the loss of control of a well, such as blowout, cratering, the cost to regain control of or re-drill the well and remediation of associated pollution. The Group’s customers may be unable or unwilling to indemnify the Group against such risks. In addition, a court may decide that certain indemnities in the Group’s current or future drilling contracts are not enforceable. The law generally considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.

28


 

Table of Contents

The Group’s insurance policies and drilling contracts contain rights to indemnity that may not adequately cover the Group’s losses, and the Group does not have insurance coverage or rights to indemnity for all risks. The Group has two main types of insurance coverage: (1) hull and machinery coverage for physical damage to the Group’s property and equipment and (2) excess liability coverage, which generally covers offshore risks, such as personal injury, third-party property claims, and third-party non-crew claims, including wreck removal and pollution. The Group generally has no hull and machinery insurance coverage for damages caused by named storms in the U.S. Gulf of Mexico. The Group maintains per occurrence deductibles that generally range up to USD 10 million for various third-party liabilities and an additional aggregate annual deductible of USD 50 million, which is self-insured through the Group’s wholly owned captive insurance company. The Group also retains the risk for any liability exceeding the Group’s USD 750 million excess liability coverage. However, pollution and environmental risks generally are not completely insurable. Additionally, the Company generally does not carry insurance for loss of revenue, except as required under certain debt agreements.

If a significant accident or other event occurs that is not fully covered by the Group’s insurance or by an enforceable or recoverable indemnity, the occurrence could adversely affect the Group’s consolidated statement of financial position, results of operations or cash flows. The amount of the Group’s insurance may also be less than the related impact on enterprise value after a loss. The Group’s insurance coverage will not in all situations provide sufficient funds to protect the Group from all liabilities that could result from its drilling operations. The Group’s coverage includes annual aggregate policy limits. As a result, the Group generally retains the risk for any losses in excess of these limits. The Group generally does not carry insurance for loss of revenue, and certain other claims may also not be reimbursed by insurance carriers. Any such lack of reimbursement may cause the Group to incur substantial costs. In addition, the Group could decide to retain more risk in the future, resulting in higher risk of losses, which could be material. Moreover, the Group may not be able to maintain adequate insurance in the future at rates that the Group considers reasonable or be able to obtain insurance against certain risks.

Recent developments in Swiss corporate governance may affect the Company’s ability to attract and retain top executives

On January 1, 2014, subject to certain transitional provisions, the Swiss Federal Council Ordinance Against Excessive Compensation at Public Companies (the “Ordinance”) became effective. The Ordinance, among other things, (a) requires a binding shareholder “say on pay” vote with respect to the compensation of members of the Company’s executive management and the Transocean Board, (b) generally prohibits the making of severance, advance, transaction premiums and similar payments to members of the Company’s executive management and the Transocean Board, and (c) requires a mandatory one-year term of the Transocean Board and the amendment of the Company’s Articles of Association to specify various compensation-related matters. At the 2014 annual general meeting, the Company’s shareholders approved amendments to the Company’s Articles of Association that implement the requirements of the Ordinance, and at each of the Company’s 2015, 2016 and 2017 annual general meetings the Company’s shareholders approved in a binding “say on pay” vote the compensation of members of the Company’s executive management and the Transocean Board. At the 2017 annual general meeting, the Company’s shareholders approved the maximum aggregate compensation of (1) the Transocean Board for the period between the 2017 annual general meeting and the 2018 annual general meeting and (2) the Company’s Executive Management Team for the year ending December 31, 2018. The Company’s shareholders will be asked to approve such matters for successive one-year periods at subsequent annual general meetings. The Ordinance further provides for criminal penalties against directors and members of executive management in case of noncompliance with certain of its requirements. The Ordinance may

29


 

Table of Contents

negatively affect the Company’s ability to attract and retain executive management and members of the Transocean Board.

Corporate restructuring activity, divestitures, acquisitions and other business combinations and reorganizations could adversely affect the Group’s ability to achieve the Group’s strategic goals

The Group has undertaken and continues to seek appropriate opportunities for restructuring the Group’s organization, engaging in strategic acquisitions, divestitures and other business combinations in order to optimize the Group’s fleet and strengthen the Group’s competitiveness. The Group faces risks arising from these activities, which could adversely affect the Group’s ability to achieve its strategic goals. For example:

·

the Group may be unable to realize the growth or investment opportunities, improvement of the Group’s financial position and other expected benefits by these activities in the expected time period or at all;

·

transactions may not be completed as scheduled or at all due to legal or regulatory requirements, market conditions or contractual and other conditions to which such transactions are subject;

·

unanticipated problems could also arise in the integration or separation processes, including unanticipated restructuring or separation expenses and liabilities, as well as delays or other difficulties in transitioning, coordinating, consolidating, replacing and integrating personnel, information and management systems, and customer products and services; and

·

the diversion of management and key employees’ attention may detract from the Group’s ability to increase revenues and minimize costs.

Certain transactions may result in other unanticipated adverse consequences.

Failure to recruit and retain key personnel could hurt the Group’s operations

The Group depends on the continuing efforts of key members of the Group’s management, as well as other highly skilled personnel, to operate and provide technical services and support for the Group’s business worldwide. Historically, competition for the personnel required for drilling operations has intensified as the number of rigs activated, added to worldwide fleets or under construction increased, leading to shortages of qualified personnel in the industry and creating upward pressure on wages and higher turnover. The Group may experience a reduction in the experience level of the Group’s personnel as a result of any increased turnover and ongoing staff reduction initiatives, which could lead to higher downtime and more operating incidents, which in turn could decrease revenues and increase costs. If increased competition for qualified personnel were to intensify in the future the Group may experience increases in costs or limits on operations.

Significant part or equipment shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could increase the Group’s operating costs, decrease the Group’s revenues and adversely impact the Group’s operations

The Group’s reliance on third-party suppliers, manufacturers and service providers to secure equipment, parts, components and sub-systems used in the Group’s operations exposes the Group to volatility in the quality, prices and availability of such items. A disruption in the deliveries from third-party suppliers, manufacturers or

30


 

Table of Contents

service providers, capacity constraints, production disruptions, price increases, quality control issues, recalls or other decreased availability of parts and equipment could adversely affect the Group’s ability to meet its commitments to customers, adversely impact the Group’s operations and revenues or increase the Group’s operating costs.

The Group’s labor costs and the operating restrictions under which the Group operates could increase as a result of collective bargaining negotiations and changes in labor laws and regulations

A substantial part of the Group’s total workforce are represented by, and some of the Group’s contracted labor work under, collective bargaining agreements, substantially all of which are subject to annual salary negotiation.  These negotiations could result in higher personnel expenses, other increased costs or increased operational restrictions as the outcome of such negotiations apply to all offshore employees not just the union members. Legislation has been introduced in the U.S. Congress that could encourage additional unionization efforts in the U.S., as well as increase the chances that such efforts succeed. Additional unionization efforts, if successful, new collective bargaining agreements or work stoppages could materially increase the Group’s labor costs and operating restrictions.

Failure to comply with anti-bribery statutes, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, could result in fines, criminal penalties, drilling contract terminations and an adverse effect on the Group’s business

The U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010 (“Bribery Act”) and similar anti-bribery laws in other jurisdictions, generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. The Group operates in many parts of the world that have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. If the Group is found to be liable for violations under the FCPA, the Bribery Act or other similar laws, either due to the Group’s acts or omissions or due to the acts or omissions of others, including the Group’s partners in various joint ventures, the Group could suffer from civil and criminal penalties or other sanctions, which could have a material adverse effect on the Group’s business, financial condition and results of operations. In addition, investors could negatively view potential violations, inquiries or allegations of misconduct under the FCPA, the Bribery Act or similar laws, which could adversely affect the Group’s reputation and the market for the Group’s shares.

The Group could also face fines, sanctions and other penalties from authorities in the relevant jurisdictions, including prohibition of the Group’s participation in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. Additionally, the Group could also face other third-party claims by agents, shareholders, debt holders, or other interest holders or constituents of the Group. Further, disclosure of the subject matter of any investigation could adversely affect the Group’s reputation and the Group’s ability to obtain new business from potential customers or retain existing business from the Group’s current customers, to attract and retain employees and to access the capital markets. The Group’s customers in relevant jurisdictions could seek to impose penalties or take other actions adverse to the Group’s interests, and the Group may be required to dedicate significant time and resources to investigate and resolve allegations of misconduct, regardless of the merit of such allegations.

31


 

Table of Contents

Regulation of greenhouse gases and climate change could have a negative impact on the Group’s business

A number of scientific studies suggests that emissions of certain gases, including greenhouse gases, carbon dioxide and methane, may be contributing to warming of the earth’s atmosphere and other climatic changes. In response to such studies, the issue of climate change and the effect of greenhouse gas emissions, in particular emissions from fossil fuels, are attracting increasing attention worldwide.

In the U.S., the U.S. Environmental Protection Agency has begun adopting and implementing a comprehensive suite of regulations to restrict emissions of greenhouse gases under existing provisions of the Clean Air Act. In addition, a number of other federal, state and regional efforts have focused on tracking or reducing greenhouse gas emissions. Efforts have also been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues. In December 2015, the U.S. joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France, however at the date of this Prospectus the U.S.’ participation in such arrangement is in doubt. Nevertheless, the resulting Paris Agreement calls for the parties to undertake “ambitious efforts” to limit the average global temperature and to conserve and enhance sinks and reservoirs of greenhouse gases. The Paris Agreement, if ratified, establishes a framework for the parties to cooperate and report actions to reduce greenhouse gas emissions.

Because the Group’s business depends on the level of activity in the offshore oil and gas industry, existing or future laws, regulations, treaties or international agreements related to greenhouse gases and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on the Group’s business if such laws, regulations, treaties or international agreements reduce the worldwide demand for oil and gas or limit drilling opportunities. In addition, such laws, regulations, treaties or international agreements could result in increased compliance costs or additional operating restrictions, which may have a negative impact on the Group’s business.

The Group is subject to litigation that, if not resolved in the Group’s favor and not sufficiently insured against, could have a material adverse effect on the Group

The Group is subject to a variety of disputes, investigations and litigation. Certain of the companies in the Group are named as defendants in numerous lawsuits alleging personal injury as a result of exposure to asbestos or toxic fumes or resulting from other occupational diseases, such as silicosis, and various other medical issues that can remain undiscovered for a considerable amount of time. Some of these companies in the Group that have been put on notice of potential liabilities have no assets. Further, the Group’s patent for dual-activity technology has been successfully challenged in certain jurisdictions, and the Group has been accused of infringing other patents. Other companies in the Group are subject to litigation relating to environmental damage. The Group cannot predict the outcome of the cases involving those companies or the potential costs to resolve them. Insurance may not be applicable or sufficient in all cases, insurers may not remain solvent, policies may not be located, and liabilities associated with the Macondo well incident may exhaust some or all of the insurance available to cover certain claims. Suits against non-asset-owning companies in the Group have and may in the future give rise to alter ego or successor-in-interest claims against the Group and the Group’s asset-owning subsidiaries to the extent a Group company is unable to pay a claim or insurance is not available or sufficient to cover the claims. The Group is subject to litigation with certain of the Group’s customers and suppliers as well as a number of significant tax disputes (including the DSME arbitration case and a tax matter relating to Songa Offshore). To the extent that one or more pending or future litigation matters is not resolved in

32


 

Table of Contents

the Group’s favor and is not covered by insurance, a material adverse effect on the Group’s financial results and condition could result.

The Group’s information technology systems are subject to cybersecurity risks and threats

The Group depends on digital technologies to conduct the Group’s offshore and onshore operations, to collect payments from customers and to pay vendors and employees. Threats to the Group’s information technology systems associated with cybersecurity risks and cyber-incidents or attacks continue to grow. In addition, breaches to the Group’s systems could go unnoticed for some period of time. Risks associated with these threats include disruptions of certain systems on the Group’s rigs; other impairments of the Group’s ability to conduct the Group’s operations; loss of intellectual property, proprietary information or customer data; disruption of the Group’s customers’ operations; loss or damage to the Group’s customer data delivery systems; and increased costs to prevent, respond to or mitigate cybersecurity events. If such a cyber-incident were to occur, it could have a material adverse effect on the Group’s business, financial condition, cash flows and results of operations.

Public health threats could have a material adverse effect on the Group’s operations and its financial results

Public health threats, such as Severe Acute Respiratory Syndrome, severe influenza and other highly communicable viruses or diseases, outbreaks of which have already occurred in various parts of the world in which the Group operates, could adversely impact the Group’s operations, the operations of the Group’s customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for the Group’s services. Quarantine of personnel or inability to access the Group’s offices or rigs could adversely affect the Group’s operations. Travel restrictions or operational problems in any part of the world in which the Group operates, or any reduction in the demand for drilling services caused by public health threats in the future, may materially impact operations and adversely affect the Group’s financial results.

A change in tax laws, treaties or regulations, or their interpretation, of any country in which the Group has operations, are incorporated or are resident could result in a higher tax rate on the Group’s worldwide earnings, which could result in a significant negative impact on the Group’s earnings and cash flows from operations

The Group operates worldwide. Consequently, the Group is subject to changes in applicable tax laws, treaties or regulations in the jurisdictions in which the Group operates, which could include laws or policies directed toward companies organized in jurisdictions with low tax rates. A material change in the tax laws, treaties or regulations, or their interpretation or application, of any country in which the Group has significant operations, or in which the Group is incorporated or resident, could result in a higher effective tax rate on the Group’s worldwide earnings and such change could be significant to the Group’s financial results.

Legislative tax proposals intending to eliminate some perceived tax advantages of companies that have legal domiciles outside the U.S., but have certain U.S. connections, have repeatedly been introduced in the U.S. Congress. Recent examples include, but are not limited to, legislative proposals that would broaden the circumstances in which a non-U.S. company would be considered a U.S. resident, including the use of “management and control” provisions to determine corporate residency, and proposals that could override certain tax treaties and limit treaty benefits on certain payments by U.S. subsidiaries to non-U.S. affiliates. Whether any such U.S. tax legislation will be enacted and its impact on the Group is uncertain. Any material change in tax laws or policies, or their interpretation, resulting from such legislative proposals could result in a

33


 

Table of Contents

higher effective tax rate on the Group’s worldwide earnings and such change could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows.

In a referendum held on February 12, 2017, Swiss voters rejected a corporate tax legislative proposal that would have abolished certain cantonal tax privileges as well as implement other significant changes to existing tax laws and practices starting in 2019. These legislative proposals were in response to certain guidance from and demands by the European Union and the Organization for Economic Co-operation and Development (the “OECD”). Switzerland must now give consideration to a revised corporate tax reform proposal. Switzerland’s implementation of any material change in tax laws or policies or its adoption of new interpretations of existing tax laws and rulings could result in a higher effective tax rate on the Group’s worldwide earnings and such change could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows.

Similarly, in October 2015, the OECD issued its action plan of tax reform measures that called for member states to take action to prevent “base erosion and profit shifting.” Some of these measures impact transfer pricing, requirements to qualify for tax treaty benefits, and the definition of permanent establishments depending on each jurisdiction’s adoption and interpretation of such proposals. The European Union issued its Anti-Tax Avoidance Directive in 2016 that required its member states to adopt specific tax reform measures by 2019. Any material change in tax laws or policies, or their interpretation, resulting from such legislative proposals or inquiries could result in a higher effective tax rate on the Group’s worldwide earnings and such change could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows.

Other tax jurisdictions in which the Group operates may consider implementing similar legislation. The implementation of such legislation, any other material changes in tax laws or policies or the adoption of new interpretations of existing tax laws and rulings could result in a higher effective tax rate on the Group’s worldwide earnings and any such change could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows.

Recently enacted U.S. Tax Reform Legislation could have material effects on the Group’s earnings and cash flows from operations

On December 22, 2017, the President of the United States signed into law the U.S. Tax Legislation, which makes significant changes to various areas of U.S. federal income tax law and which could significantly affect the Group’s business, operations, financial condition and results of operations, and may have an adverse impact on investors in shares in the Company.  These changes may include (i) the taxation of unrepatriated earnings of non-U.S. subsidiaries of the Company’s U.S. affiliates as part of the transition of U.S. international taxation from a worldwide tax system to a territorial tax system, (ii) a deferral or permanent reduction in the amount of interest that is deductible for U.S. federal income tax purposes after 2017, and (iii) additional U.S. tax after 2017 on certain deductible payments by the Company’s U.S. subsidiaries to its non-U.S. subsidiaries if such payments are subject to reduced rates of U.S. withholding tax under a treaty.  Although the Company is evaluating the U.S. Tax Legislation with its professional advisers, the impact on the U.S. Group’s business is currently uncertain.

34


 

Table of Contents

A loss of a major tax dispute or a successful tax challenge to the Group’s operating structure, intercompany pricing policies or the taxable presence of the Group’s key subsidiaries in certain countries could result in a higher tax rate on the Group’s worldwide earnings, which could result in a significant negative impact on the Group’s earnings and cash flows from operations

The Company is a Swiss corporation that operates through the Company’s various subsidiaries in a number of countries throughout the world. Consequently, the Company is subject to tax laws, treaties and regulations in and between the countries in which the Group operates. The Group’s income taxes are based upon the applicable tax laws and tax rates in effect in the countries in which the Group operates and earns income, as well as upon the Group’s operating structures in these countries.

The Group’s income tax returns are subject to review and examination. The Group’s does not recognize the benefit of income tax positions the Group believes are more likely than not to be disallowed upon challenge by a tax authority. If any tax authority successfully challenges the Group’s operational structure, intercompany pricing policies or the taxable presence of the Group’s key subsidiaries in certain countries; or if the terms of certain income tax treaties are interpreted in a manner that is adverse to the Group’s structure; or if the Group loses a material tax dispute in any country, the Group’s effective tax rate on the Group’s worldwide earnings could increase substantially and the Group’s earnings and cash flows from operations could be materially adversely affected. For example, the Group cannot be certain that the U.S. Internal Revenue Service (“IRS”) will not successfully contend that the Group or any of the Group’s key subsidiaries were or are engaged in a trade or business in the U.S. or, when applicable, that the Group or any of the Group’s key subsidiaries maintained or maintain a permanent establishment in the U.S., since, among other things, such determination involves considerable uncertainty. If the Group or any of its key subsidiaries were considered to have been engaged in a trade or business in the U.S., when applicable, through a permanent establishment, the Group could be subject to U.S. corporate income and additional branch profits taxes on the portion of the Group’s earnings effectively connected to such U.S. business during the period in which this was considered to have occurred, in which case the Group’s effective tax rate on worldwide earnings for that period could increase substantially, and the Group’s earnings and cash flows from operations for that period could be adversely affected.

As a Swiss corporation, the Company is subject to Swiss legal provisions that may limit its flexibility to swiftly implement certain initiatives or strategies

The Company is required, from time to time, to evaluate the carrying amount of the Company’s investments in affiliates, as presented on the Company’s Swiss standalone balance sheet of the Company’s statutory accounts. If the Company were to determine that the carrying amount of any such investment exceeded its fair value, the Company may conclude that such investment is impaired. The recognized loss associated with such a non-cash impairment could result in the Company’s net assets no longer covering the Company’s statutory share capital and statutory capital reserves. Under Swiss law, if the Company’s net assets cover less than 50% of the Company’s statutory share capital and statutory capital reserves, the Transocean Board must in these circumstances convene a general meeting of shareholders and propose measures to remedy such a capital loss. The appropriate measures depend on the relevant circumstances and the magnitude of the recognized loss and may include seeking shareholder approval for offsetting the aggregate loss, or a portion thereof, with the Company’s statutory capital reserves including qualifying additional paid-in capital otherwise available for distributions to shareholders or raising new equity. Depending on the circumstances, the Company may also need to use qualifying additional paid-in capital available for distributions in order to reduce the Company’s

35


 

Table of Contents

accumulated net loss and such use might reduce the Company’s ability to make distributions without subjecting the Company’s shareholders to Swiss withholding tax. These Swiss law requirements could limit the Company’s flexibility to swiftly implement certain initiatives or strategies.

The Company is subject to anti-takeover provisions

The Company’s Articles of Association and Swiss law contain provisions that could prevent or delay an acquisition of the Company by means of a tender offer, a proxy contest or otherwise. These provisions may also adversely affect prevailing market prices for the Company’s shares. These provisions, among other things:

·

provide that the Board of Directors is authorized, subject to obtaining shareholder approval every two years, at any time during a maximum two-year period, which under the current authorized share capital of the Company will expire on May 12, 2018, to issue a specified number of shares, which under the current authorized share capital of the Company is approximately 4.82% of the share capital registered in the commercial register, and to limit or withdraw the pre-emptive rights of existing shareholders in various circumstances. The percentage provided above does not include the authorized share capital of Transocean Ltd. approved by the extraordinary general meeting of shareholders convened on January 16, 2018 (“Extraordinary General Meeting”), exclusively for the purpose of the Compulsory Acquisition or a mandatory offer of the Songa Shares that have not been acquired by the Company upon settlement of the Voluntary Tender Offer;

·

provide for a conditional share capital that authorizes the issuance of additional shares up to a maximum amount of approximately 31.14% (of which 57.78% is reserved for the issuance of Shares issuable upon conversion of the Existing Exchangeable Bonds) of the share capital currently registered in the commercial register without obtaining additional shareholder approval through: (1) the exercise of conversion, exchange, option, warrant or similar rights for the subscription of shares granted in connection with bonds, options, warrants or other securities newly or already issued in national or international capital markets or new or already existing contractual obligations by or of any of the Company’s subsidiaries; or (2) in connection with the issuance of shares, options or other share-based awards;

·

provide that any shareholder who wishes to propose any business or to nominate a person or persons for election as director at any annual meeting may only do so if advance notice is given to the Company;

·

provide that directors can be removed from office only by the affirmative vote of the holders of at least two-thirds of the shares entitled to vote;

·

provide that a merger or demerger transaction requires the affirmative vote of the holders of at least two-thirds of the shares represented at the meeting and provide for the possibility of a so-called “cash-out” or “squeeze-out” merger if the acquirer controls 90% of the outstanding shares entitled to vote at the meeting;

·

provide that any action required or permitted to be taken by the holders of shares must be taken at a duly called annual or extraordinary general meeting of shareholders;

36


 

Table of Contents

·

limit the ability of the Company’s shareholders to amend or repeal some provisions of the Company’s Articles of Association; and

·

limit transactions between the Company and an “interested shareholder,” which is generally defined as a shareholder that, together with its affiliates and associates, beneficially, directly or indirectly, owns 15% or more of the Company’s shares entitled to vote at a general meeting.

Risks Related to the Industry in Which the Group Operates

The global nature of the Group’s operations involves additional risks

The Group operates in various regions throughout the world, which may expose the Group to political and other uncertainties, including risks of:

·

terrorist acts, war, piracy and civil unrest;

·

seizure, expropriation or nationalization of the Group’s equipment;

·

expropriation or nationalization of the Group’s customers’ property;

·

repudiation or nationalization of contracts;

·

imposition of trade or immigration barriers;

·

import-export quotas;

·

wage and price controls;

·

changes in law and regulatory requirements, including changes in interpretation and enforcement;

·

involvement in judicial proceedings in unfavorable jurisdictions;

·

damage to the Group’s equipment or violence directed at the Group’s employees, including kidnappings;

·

complications associated with supplying, repairing and replacing equipment in remote locations;

·

the inability to move income or capital; and

·

currency exchange fluctuations and currency exchange restrictions, including exchange or similar controls that may limit the Group’s ability to convert local currency into U.S. dollars and transfer funds out of a local jurisdiction.

The Group’s non-U.S. contract drilling operations are subject to various laws and regulations in certain countries in which the Group operates, including laws and regulations relating to the import and export, equipment and operation of drilling units, currency conversions and repatriation, oil and gas exploration and development, taxation and social contributions of offshore earnings and earnings of expatriate personnel. The

37


 

Table of Contents

Group is also subject to the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and other U.S. laws and regulations governing the Group’s international operations. In addition, various state and municipal governments, universities and other investors have proposed or adopted divestment and other initiatives regarding investments including, with respect to state governments, by state retirement systems in companies that do business with countries that have been designated as state sponsors of terrorism by the U.S. State Department. Failure to comply with applicable laws and regulations, including those relating to sanctions and export restrictions, may subject the Group to criminal sanctions or civil remedies, including fines, denial of export privileges, injunctions or seizures of assets. Investors could view any potential violations of OFAC regulations negatively, which could adversely affect the Group’s reputation and the market for the Company’s shares.

Governments in some countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and gas and other aspects of the oil and gas industries in their countries, including local content requirements for participating in tenders for certain drilling contracts. Many governments favor or effectively require the awarding of drilling contracts to local contractors or require non-local contractors to employ citizens of, or purchase supplies from, a particular jurisdiction or require use of a local agent. In addition, government action, including initiatives by the Organisation of the Petroleum Exporting Countries (“OPEC”), may continue to cause oil or gas price volatility. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work by major oil companies and may continue to do so.

A substantial portion of the Group’s drilling contracts are partially payable in local currency. Those amounts may exceed the Group’s local currency needs, leading to the accumulation of excess local currency, which, in certain instances, may be subject to either temporary blocking or other difficulties converting to U.S. dollars, the Group’s functional currency, or to other currencies in which the Group operates. Excess amounts of local currency may be exposed to the risk of currency exchange losses.

The shipment of goods, services and technology across international borders subjects the Group to extensive trade laws and regulations. The Group’s import and export activities are governed by unique customs laws and regulations in each of the countries where the Group operates. Moreover, many countries, including the U.S., control the import and export of certain goods, services and technology and impose related import and export recordkeeping and reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities, and the Group is also subject to the U.S. anti-boycott law.

The laws and regulations concerning import and export activity, recordkeeping and reporting, import and export control and economic sanctions are complex and constantly changing. These laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting the Group’s operations. Ongoing economic challenges may increase some governments’ efforts to enact, enforce, amend or interpret laws and regulations as a method to increase revenue. Shipments can be delayed and denied import or export for a variety of reasons, some of which are outside the Group’s control and some of which may result from failure to comply with existing legal and regulatory regimes. Shipping delays or denials could cause unscheduled operational downtime.

An inability to obtain visas and work permits for the Group’s employees on a timely basis could impact the Group’s operations and have an adverse effect on the Group’s business. The Group’s ability to operate

38


 

Table of Contents

worldwide depends on the Group’s ability to obtain the necessary visas and work permits for the Group’s personnel to travel in and out of, and to work in, the jurisdictions in which the Group operates. Governmental actions in some of the jurisdictions in which the Group operates may make it difficult for the Group to move its personnel in and out of these jurisdictions by delaying or withholding the approval of these permits. If the Group is not able to obtain visas and work permits for the employees needed to operate its rigs on a timely basis, the Group might not be able to perform its obligations under the Group’s drilling contracts, which could allow the Group’s customers to cancel the contracts. If the Group’s customers cancel some of the Group’s drilling contracts, and the Group is unable to secure new drilling contracts on a timely basis and on substantially similar terms, it could adversely affect the Group’s consolidated statement of financial position, results of operations or cash flows.

Compliance with or breach of environmental laws can be costly and/or expose the Group to liability and could limit the Group’s operations

The Group’s business in the offshore drilling industry is affected by laws and regulations relating to the energy industry and the environment, including international conventions and treaties, and regional, national, state, and local laws and regulations. The offshore drilling industry depends on demand for services from the oil and gas exploration and production industry, and, accordingly, the Group is directly affected by the adoption of laws and regulations that, for economic, environmental or other policy reasons, curtail exploration and development drilling for oil and gas. Compliance with such laws, regulations and standards, where applicable, may require the Group to make significant capital expenditures, such as the installation of costly equipment or operational changes, and may affect the resale values or useful lives of the Group’s rigs.

The Group may also incur additional costs in order to comply with other existing and future regulatory obligations, including, but not limited to, costs relating to air emissions, including greenhouse gases, the management of ballast waters, maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of the Group’s ability to address pollution incidents. Offshore drilling in certain areas has been curtailed and, in certain cases, prohibited because of concerns over protection of the environment. These costs could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows. A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of the Group’s operations.

To the extent new laws are enacted or other governmental actions are taken that prohibit or restrict offshore drilling or impose additional environmental protection requirements that result in increased costs to the oil and gas industry, in general, or the offshore drilling industry, in particular, the Group’s business or prospects could be materially adversely affected. The operation of the Group’s drilling rigs will require certain governmental approvals. These governmental approvals may involve public hearings and costly undertakings on the Group’s part. The Group may not obtain such approvals or such approvals may not be obtained in a timely manner. If the Group fails to timely secure the necessary approvals or permits, the Group’s customers may have the right to terminate or seek to renegotiate their drilling contracts to the Group’s detriment. The amendment or modification of existing laws and regulations or the adoption of new laws and regulations curtailing or further regulating exploratory or development drilling and production of oil and gas could have a material adverse effect on the Group’s business, operating results or financial condition. Compliance with any such new legislation or regulations could have an adverse effect on the Group’s statements of operations and cash flows.

39


 

Table of Contents

As an operator of mobile offshore drilling units in some offshore areas, the Group may be liable for damages and costs incurred in connection with oil spills or waste disposals related to those operations, and the Group may also be subject to significant fines in connection with spills. For example, an oil spill could result in significant liability, including fines, penalties and criminal liability and remediation costs for natural resource damages, as well as third-party damages, to the extent that the contractual indemnification provisions in the Group’s drilling contracts are not enforceable or otherwise sufficient, or if the Group’s customers are unwilling or unable to contractually indemnify the Group from these risks. Additionally, the Group may not be able to obtain such indemnities in the Group’s future drilling contracts, and the Group’s customers may not have the financial capability to fulfill their contractual obligations to the Company. Also, these indemnities may be held to be unenforceable in certain jurisdictions, as a result of public policy or for other reasons. For example, one of the courts in the litigation related to the Macondo well incident has refused to enforce aspects of the Transocean Group’s indemnity with respect to certain environmental-related liabilities. Laws and regulations protecting the environment have become more stringent in recent years, and may in some cases impose strict liability, rendering a person liable for environmental damage without regard to negligence. These laws and regulations may expose the Group to liability for the conduct of or conditions caused by others or for acts that were in compliance with all applicable laws at the time they were performed. The application of these requirements or the adoption of new requirements or measures could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows. In addition, the Consent Decree (as defined below) and probation arising out of certain Transocean Group subsidiaries’ cooperation guilty plea agreement by and among the U.S. Department of Justice (the “DOJ”) and certain of the Transocean Group’s affiliates (the “Plea Agreement”), add to these regulations, requirements and liabilities. One Transocean Group subsidiary’s guilty plea to negligently discharging oil into the U.S. Gulf of Mexico, in violation of the Clean Water Act,  in connection with the Macondo well incident caused the Company to incur liabilities under the environmental laws relating to the Macondo well incident. The Company may be subject to additional liabilities and penalties.

The continuing effects of the enhanced regulations enacted following the Macondo well incident and of agreements applicable to the Transocean Group could materially and adversely affect the Group’s worldwide operations

Following the Macondo well incident, enhanced governmental safety and environmental requirements applicable to both deepwater and shallow water operations were adopted for drilling in the U.S. Gulf of Mexico. In order to obtain drilling permits, operators must submit applications that demonstrate compliance with the enhanced regulations, which require independent third-party inspections, certification of well design and well control equipment and emergency response plans in the event of a blowout, among other requirements. Operators have previously had, and may in the future have, difficulties obtaining drilling permits in the U.S. Gulf of Mexico. In addition, the oil and gas industry has adopted new equipment and operating standards, such as the American Petroleum Institute Standard 53 related to the installation and testing of well control equipment. These new safety and environmental guidelines and standards and any further new guidelines or standards the U.S. government or industry may issue or any other steps the U.S. government or industry may take, could disrupt or delay operations, increase the cost of operations, increase out-of-service time or reduce the area of operations for drilling rigs in the U.S. and non-U.S. offshore areas.

Other governments could take similar actions related to implementing new safety and environmental regulations in the future. Additionally, some of the Group’s customers have elected to voluntarily comply with some or all of the new inspections, certification requirements and safety and environmental guidelines on rigs operating outside of the U.S. Gulf of Mexico. Additional governmental regulations and requirements

40


 

Table of Contents

concerning licensing, taxation, equipment specifications and training requirements or the voluntary adoption of such requirements or guidelines by the Group’s customers could increase the costs of the Group’s operations, increase certification and permitting requirements, increase review periods and impose increased liability on offshore operations. The requirements applicable to the Transocean Group under the Transocean Group’s settlement with the DOJ cover safety, environmental, reporting, operational and other matters (the “Consent Decree”) and are in addition to the regulations applicable to other industry participants and may require additional agreements and corporate compliance resources that, together with the Plea Agreement could cause the Group to incur additional costs and liabilities. The continuing effects of the enhanced regulations may also decrease the demand for drilling services, negatively affect day rates and increase out-of-service time, which could ultimately have a material adverse effect on the Group’s revenues and profitability.

The offshore drilling industry is highly competitive and cyclical, with intense price competition

The offshore contract drilling industry is highly competitive with numerous industry participants, none of which has a dominant market share. Drilling contracts are traditionally awarded on a competitive bid basis. Although rig availability, service quality and technical capability are drivers of customer contract awards, bid pricing and intense price competition are often key determinants for which a qualified contractor is awarded a job.

The offshore drilling industry has historically been cyclical and is impacted by oil and natural gas price levels and volatility. There have been periods of high customer demand, limited rig supply and high day rates, followed by periods of low customer demand, excess rig supply and low day rates. Changes in commodity prices can have a dramatic effect on rig demand, and periods of excess rig supply may intensify competition in the industry and result in the idling of older and less technologically advanced equipment. The Group has idled and stacked rigs, and may in the future idle or stack additional rigs or enter into lower day rate drilling contracts in response to market conditions. The Group cannot predict when or if any idled or stacked rigs will return to service.

During prior periods of high day rates and rig utilization rates, the Group and other industry participants have responded to increased customer demand by increasing the supply of rigs through ordering the construction of new units. In periods of low oil and natural gas price levels, growth in new construction has historically resulted in an oversupply of rigs and has caused a subsequent decline in day rates and rig utilization rates, sometimes for extended periods of time. Presently, there are numerous recently constructed high-specification floaters and other drilling units capable of competing with the Group’s rigs that have entered the global market, and there are more that are under construction.

The entry into service of these new units has increased and will continue to increase supply. The increased supply has contributed to and may continue to contribute to a reduction in day rates as rigs are absorbed into the active fleet and has led to accelerated stacking of the existing fleet.

Two of the Group’s three ultra-deepwater drillships currently under construction have not been contracted for work. Combined with the rapid increase in the number of rigs in the global market completing contracts and becoming idle, the number of new units expected to be delivered without contracts has intensified and may further intensify price competition. Any further increase in construction of new units would likely exacerbate the negative impact of increased supply on day rates and utilization rates. Additionally, lower market day rates and intense price competition may drive customers to demand renegotiation of existing contracts to lower day

41


 

Table of Contents

rates in exchange for longer contract terms. In an oversupplied market, the Group may have limited bargaining power to negotiate on more favorable terms. Lower day rates and rig utilization rates could adversely affect the Group’s revenues and profitability.

The Group may not be able to renew or obtain new drilling contracts for rigs whose contracts are expiring or are terminated or obtain drilling contracts for the Group’s uncontracted newbuilds, which could adversely affect the Group’s consolidated statements of operations

The Group’s ability to renew expiring drilling contracts or obtain new drilling contracts will depend on the prevailing market conditions at the time. If the Group is unable to obtain new drilling contracts in direct continuation with existing contracts or for the Group’s uncontracted newbuild units, or if new drilling contracts are entered into day rates substantially below the existing day rates or on terms otherwise less favorable compared to existing contract terms, the Group’s revenues and profitability could be adversely affected.

The offshore drilling markets in which the Group compete experience fluctuations in the demand for drilling services. A number of existing drilling contracts for the Group’s drilling rigs that are currently operating are scheduled to expire before December 31, 2018. As of January 31, 2018, two of the ultra-deepwater drillships the Group currently has under construction as part of the Group’s newbuild program are being constructed without customer drilling contracts. The Group will attempt to secure drilling contracts for these units prior to their completion. The Group may be unable to obtain drilling contracts for the Group’s rigs that are currently operating upon the expiration or termination of such contracts or obtain drilling contracts for the Group’s newbuilds, and there may be a gap in the operation of the rigs between the current contracts and subsequent contracts. In particular, if oil and natural gas prices remain low, as is currently the case, or it is expected that such prices will decrease in the future, at a time when the Group is seeking drilling contracts for the Group’s rigs, the Group may be unable to obtain drilling contracts at attractive day rates or at all.

The Group’s business depends on the level of activity in the offshore oil and gas industry, which is significantly affected by volatile oil and gas prices and other factors

The Group’s business depends on the level of activity in oil and gas exploration, development and production in offshore areas worldwide. Demand for the Group’s services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and, to a lesser extent, natural gas prices. Oil and gas prices are extremely volatile and are affected by numerous factors, including the following:

·

worldwide demand for oil and gas, including economic activity in the U.S. and other large energy-consuming markets;

·

the ability of OPEC to set and maintain production levels, productive spare capacity and pricing;

·

the level of production in non-OPEC countries;

·

the policies of various governments regarding exploration and development of their oil and gas reserves;

·

international sanctions on oil-producing countries, or the lifting of such sanctions;

·

advances in exploration, development and production technology;

42


 

Table of Contents

·

the further development of shale technology to exploit oil and gas reserves;

·

the discovery rate of new oil and gas reserves;

·

the rate of decline of existing oil and gas reserves;

·

laws and regulations related to environmental matters, including those addressing alternative energy sources and the risks of global climate change;

·

the development and exploitation of alternative fuels;

·

accidents, adverse weather conditions, natural disasters and other similar incidents relating to the oil and gas industry; and

·

the worldwide security and political environment, including uncertainty or instability resulting from an escalation or outbreak of armed hostilities, civil unrest or other crises in the Middle East or other geographic areas or acts of terrorism.

Demand for the Group’s services is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil companies. Any prolonged reduction in oil and natural gas prices could depress the immediate levels of exploration, development and production activity. Perceptions of longer term lower oil and natural gas prices by oil and gas companies could similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects. Lower levels of activity result in a corresponding decline in the demand for the Group’s services, which could have a material adverse effect on the Group’s revenue and profitability. Oil and gas prices and market expectations of potential changes in these prices significantly affect this level of activity. However, increases in near-term commodity prices do not necessarily translate into increased offshore drilling activity since customers’ expectations of longer-term future commodity prices typically drive demand for the Group’s rigs. The current commodity pricing environment has had a negative impact on demand for the Group’s services, and it could continue. The price of crude oil as reported on the New York Mercantile Exchange has weakened significantly and, despite recent price improvements, has not returned to the higher levels experienced prior to December 31, 2014. Consequently, customers have delayed or cancelled many exploration and development programs, resulting in reduced demand for the Group’s services. Also, increased competition for customers’ drilling budgets could come from, among other areas, land-based energy markets worldwide. The availability of quality drilling prospects, exploration success, relative production costs, the stage of reservoir development and political and regulatory environments also affect customers’ drilling campaigns. Worldwide military, political and economic events have contributed to oil and gas price volatility and are likely to do so in the future.

Acts of terrorism, piracy and political and social unrest could affect the markets for drilling services, which may have a material adverse effect on the Group’s results of operations

Acts of terrorism and social unrest, brought about by world political events or otherwise, have caused instability in the world’s financial and insurance markets in the past and may occur in the future. Such acts could be directed against companies of the Group. In addition, acts of terrorism, piracy and social unrest could lead to increased volatility in prices for crude oil and natural gas and could affect the markets for drilling services.

43


 

Table of Contents

Insurance premiums could increase and coverage may be unavailable in the future. Government regulations may effectively preclude the Group from engaging in business activities in certain countries. These regulations could be amended to cover countries where the Group currently operates or where the Group may wish to operate in the future. The Group’s drilling contracts do not generally provide indemnification against loss of capital assets or loss of revenues resulting from acts of terrorism, piracy or political or social unrest. The Group has limited insurance for the Group’s assets providing coverage for physical damage losses resulting from risks, such as terrorist acts, piracy, vandalism, sabotage, civil unrest, expropriation and acts of war, and the Group does not carry insurance for loss of revenues resulting from such risks.

Financial Risks

The Transocean Group has identified a material weakness in its internal control over financial reporting, and the Group’s business and stock price may be adversely affected if the Group’s internal control over financial reporting is not effective

Under Section 404 of the Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC, the Transocean Group is required to conduct a comprehensive evaluation of the Transocean Group’s internal control over financial reporting. To complete this evaluation, the Group is required to document and test the Group’s internal control over financial reporting; management is required to assess and issue a report concerning the Group’s internal control over financial reporting; and the Group’s independent registered public accounting firm is required to attest to the effectiveness of the Group’s internal control over financial reporting. The Group’s internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be prevented or detected timely. Even effective internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

In the course of the external audit of the consolidated financial statements for the year ended December 31, 2016 the Transocean Group identified a material weakness in the Transocean Group’s controls over income tax accounting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Transocean Group’s annual or interim financial statements will not be prevented or detected on a timely basis. A more complete description of the recently identified errors and the resulting material weakness is included in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 4—Correction of Errors in Previously Reported Consolidated Financial Statements” of the 2016 Annual Report. Although the Group is evaluating certain measures in order to remediate this material weakness, the Group can provide no assurance that the Group’s remediation efforts will be effective or that additional material weaknesses in the Group’s internal control over financial reporting will not be identified in the future.

The existence of a material weakness could result in errors in the Group’s financial statements that could result in a restatement of financial statements, which could cause the Group to fail to meet its reporting obligations, potentially lead to a loss of investor confidence and may have a negative impact on the trading price of the Group’s shares.

44


 

Table of Contents

The Group could experience a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows to the extent the Macondo well’s operator fails to indemnify the Transocean Group or is otherwise unable to indemnify the Transocean Group for compensatory damages related to the Macondo well incident as required under the terms of the  settlement agreement

The combined response team to the Macondo well incident was unable to stem the flow of hydrocarbons from the well prior to the sinking of Deepwater Horizon. The resulting spill of hydrocarbons was the most extensive in U.S. history. Under the drilling contract and in accordance with the Transocean Group’s settlement agreement with the operator, BP plc. (together with its affiliates, “BP”) agreed to indemnify the Transocean Group with respect to certain matters, and the Transocean Group agreed to indemnify BP with respect to certain matters. The Group could experience a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows to the extent that BP fails to fully satisfy its indemnification obligations, including by reason of financial or legal restrictions, or the Group’s insurance policies do not fully cover these amounts. In addition, in connection with the Consent Decree the Company agreed that it will not use payments pursuant to a civil consent decree by and among the DOJ and certain of the Transocean Group’s affiliates as a basis for indemnity or reimbursement from non insurer defendants named in the complaint by the U.S. or their affiliates.

The Group’s shipyard projects and operations are subject to delays and cost overruns

As of September 30, 2017, the Group had three ultra-deepwater floater newbuild rigs under construction. The Group also has a variety of other more limited shipyard projects at any given time. These shipyard projects are subject to the risks of delay or cost overruns inherent in any such construction project resulting from numerous factors, including the following:

·

shipyard availability, failures and difficulties;

·

shortages of equipment, materials or skilled labor;

·

unscheduled delays in the delivery of ordered materials and equipment;

·

design and engineering problems, including those relating to the commissioning of newly designed equipment;

·

latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions;

·

unanticipated actual or purported change orders;

·

disputes with shipyards and suppliers;

·

failure or delay of third-party vendors or service providers;

·

availability of suppliers to recertify equipment for enhanced regulations;

·

strikes, labor disputes and work stoppages;

45


 

Table of Contents

·

customer acceptance delays;

·

adverse weather conditions, including damage caused by such conditions;

·

terrorist acts, war, piracy and civil unrest;

·

unanticipated cost increases; and

·

difficulty in obtaining necessary permits or approvals.

These factors may contribute to cost variations and delays in the delivery of the Group’s newbuild units and other rigs undergoing shipyard projects. Delays in the delivery of these units would impact contract commencement, resulting in a loss of revenue to the Group, and may also cause customers to terminate or shorten the term of the drilling contract for the rig pursuant to applicable late delivery clauses. In the event of termination of any of these drilling contracts, the Group may not be able to secure a replacement contract on as favorable terms, if at all.

The Group’s operations also rely on a significant supply of capital and consumable spare parts and equipment to maintain and repair the Group’s fleet. The Group also relies on the supply of ancillary services, including supply boats and helicopters. Shortages in materials, manufacturing defects, delays in the delivery of necessary spare parts, equipment or other materials, or the unavailability of ancillary services could negatively impact the Group’s future operations and result in increases in rig downtime and delays in the repair and maintenance of the Group’s fleet.

Worldwide financial, economic and political conditions could have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows

Worldwide financial and economic conditions could restrict the Group’s ability to access the capital markets at a time when the Group would like, or need, to access such markets, which could have an impact on the Group’s flexibility to react to changing economic and business conditions. Worldwide economic conditions have in the past impacted, and could in the future impact, the lenders participating in the Group’s credit facilities and the Group’s customers, causing them to fail to meet their obligations to the Group. If economic conditions preclude or limit financing from banking institutions participating in the Group’s credit facilities, the Group may not be able to obtain similar financing from other institutions. A slowdown in economic activity could further reduce worldwide demand for energy and extend or worsen the current period of low oil and natural gas prices. A further decline in oil and natural gas prices or an extension of the current low oil and natural gas prices could reduce demand for the Group’s drilling services and have a material adverse effect on the Group’s consolidated statement of financial position, results of operations or cash flows.

The world economy is currently facing a number of challenges. An extended period of negative outlook for the world economy could reduce the overall demand for oil and natural gas and for the Group’s services. These potential developments, or market perceptions concerning these and related issues, could affect the Group’s consolidated statement of financial position, results of operations or cash flows. In addition, turmoil and hostilities in the Middle East, North Africa and other geographic areas and countries are adding to overall risk. An extended period of negative outlook for the world economy could further reduce the overall demand for oil

46


 

Table of Contents

and natural gas and for the Group’s services. Such changes could adversely affect the Group’s business and the Group’s consolidated statement of financial position, results of operations or cash flows.

The Group relies heavily on a relatively small number of customers and the loss of a significant customer or a dispute that leads to the loss of a customer could have a material adverse impact on the Group’s consolidated statement of financial position, results of operations or cash flows

The Group engages in offshore drilling services for most of the leading international oil companies or their affiliates, as well as for many government-controlled oil companies and independent oil companies. For the year ended December 31, 2016, the Transocean Group’s most significant customers were Chevron Corporation (“Chevron”), BP plc (“BP”), Royal Dutch Shell plc (together with its affiliates, “Shell”) and Petróleo Brasileiro S.A. (“Petrobras”), accounting for approximately 24%, 12%, 12% and 11%, respectively, of the Transocean Group’s consolidated operating revenues. As of October 26, 2017, the customers with the most significant aggregate amount of contract backlog were Shell and Chevron, representing approximately 72% and 15%, respectively, of the Transocean Group’s total contract backlog. The loss of any of these customers or another significant customer, or a decline in payments under any of the Group’s drilling contracts, could, at least in the short term, have a material adverse effect on the Group’s results of operations and cash flows.

In addition, the Group’s drilling contracts subject the Group to counterparty risks. The ability of each of the Group’s counterparties to perform its obligations under a contract with the Group will depend on a number of factors that are beyond the Group’s control and may include, among other things, general economic conditions, the condition of the offshore drilling industry, prevailing prices for oil and natural gas, the overall financial condition of the counterparty, the day rates received and the level of expenses necessary to maintain drilling activities. In addition, in depressed market conditions, such as the Group is currently experiencing, the Group’s customers may no longer need a drilling rig that is currently under contract or may be able to obtain a comparable drilling rig at a lower day rate. Should counterparty fail to honor its obligations under an agreement with the Group, the Group could sustain losses, which could have a material adverse effect on the Group’s business and on the Group’s consolidated statement of financial condition results of operations or cash flows.

The recent downgrades in the Transocean Group’s credit ratings by various credit rating agencies could impact the Group’s access to capital and materially adversely affect the Group’s business and financial condition

During the year ended December 31, 2015, three credit rating agencies downgraded their credit ratings of the Transocean Group’s non-credit enhanced senior unsecured long-term debt (“Debt Rating”) to Debt Ratings that are below investment grade. During the year ended December 31, 2016 and in January 2017 and October 2017, the same three credit rating agencies further downgraded the Transocean Group’s Debt Rating. The Transocean Group’s Debt Rating levels could have material adverse consequences on the Group’s business and future prospects and could:

·

limit the Group’s ability to access debt markets, including for the purpose of refinancing the Group’s existing debt;

47


 

Table of Contents

·

cause the Group to refinance or issue debt with less favorable terms and conditions, which debt may require collateral and restrict, among other things, the Group’s ability to pay distributions or repurchase shares;

·

increase certain fees under the Group’s credit facilities and interest rates under indentures governing certain of the Group’s senior notes;

·

negatively impact current and prospective customers’ willingness to transact business with the Group;

·

impose additional insurance, guarantee and collateral requirements;

·

limit the Group’s access to bank and third-party guarantees, surety bonds and letters of credit; and

·

suppliers and financial institutions may lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with the Group thereby increasing the need for higher levels of cash on hand, which would decrease the Group’s ability to repay debt balances.

The downgrades have caused some of the effects listed above, and any further downgrades may cause or exacerbate, any of the effects listed above.

The Group has a substantial amount of debt, including secured debt, and the Group may lose the ability to obtain future financing and suffer competitive disadvantages

At September 30, 2017 and December 31, 2016, the Transocean Group’s total consolidated debt was USD 7.3 billion and USD 8.5 billion, respectively. At September 30, 2017 and December 31, 2016, the Songa Group’s total consolidated liabilities were USD 2.4 billion and USD 2.6 billion. This substantial level of debt and other obligations could have significant adverse consequences on the Group’s business and future prospects, including the following:

·

the Group may be unable to obtain financing in the future for working capital, capital expenditures, acquisitions, debt service requirements, distributions, share repurchases, or other purposes;

·

the Group may be unable to use operating cash flow in other areas of the Group’s business because the Group must dedicate a substantial portion of these funds to service the debt;

·

the Group could become more vulnerable to general adverse economic and industry conditions, including increases in interest rates, particularly given the Group’s substantial indebtedness, some of which bears interest at variable rates;

·

the Group may be unable to meet financial ratios in the indentures governing certain of the Group’s debt or in the Group’s bank credit agreements or satisfy certain other conditions included in the Group’s bank credit agreements, which could result in the Group