·

Revenues were $1.34 billion, compared to $1.85 billion in the fourth quarter of 2015;

·

Operating and maintenance expense was $665 million, down from $794 million in the prior period;

·

Adjusted net income was $254 million, $0.69 per diluted share, excluding $5 million of net unfavorable items.  This compares with $615 million, $1.68 per diluted share, in the fourth quarter of 2015, excluding $4 million of net unfavorable items;

·

Net income attributable to controlling interest was $249 million, $0.68 per diluted share, compared with $611 million, $1.66 per diluted share, in the prior quarter;

·

The Annual Effective Tax Rate(1) was 22.8 percent, compared with 13.1 percent in the fourth quarter of 2015;

·

Cash flows from operating activities were $631 million, compared with $960 million in the previous quarter;

·

Revenue efficiency(2) was 95.0 percent, compared with 95.9 percent in the fourth quarter of 2015;

·

Rig utilization(3) was 51 percent, compared with 60 percent in the prior quarter; and

·

Contract backlog was $14.6 billion as of the April 2016 Fleet Status Report.

·

$4 million, $0.01 per diluted share, in restructuring costs associated with employee severance; and

·

$2 million related to the loss on impairment of the midwater floater Transocean John Shaw, which the company has identified for recycling.

·

$1 million in favorable discrete tax benefits and miscellaneous other items.

(1)

Annual Effective Tax Rate is defined as income tax expense from continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income from continuing operations before income tax expense excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate.  See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

(2)

Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions.  See the accompanying schedule entitled “Revenue Efficiency.”

(3)

Rig utilization is defined as the total number of operating days divided by the total number of rig calendar days in the measurement period, expressed as a percentage.  See the accompanying schedule entitled “Utilization.”

(4)

Effective Tax Rate is defined as income tax expense for continuing operations divided by income from continuing operations before income taxes.  See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

Three months ended 

March 31, 

2016

2015

Operating revenues

Contract drilling revenues

$

$

Other revenues

Costs and expenses

Operating and maintenance

Depreciation

General and administrative

Loss on impairment

Gain (loss) on disposal of assets, net

Operating income (loss)

Other income (expense), net

Interest income

Interest expense, net of amounts capitalized

Other, net

Income (loss) from continuing operations before income tax expense

Income tax expense

Income (loss) from continuing operations

Loss from discontinued operations, net of tax

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to controlling interest

$

$

Earnings (loss) per share-basic

Earnings (loss) from continuing operations

$

$

Earnings (loss) from discontinued operations

 —

Earnings (loss) per share

$

$

Earnings (loss) per share-diluted

Earnings (loss) from continuing operations

$

$

Earnings (loss) from discontinued operations

 —

Earnings (loss) per share

$

$

Weighted-average shares outstanding

Basic

Diluted

March 31, 

December 31, 

2016

2015

Assets

Cash and cash equivalents

$

$

Accounts receivable, net of allowance for doubtful accounts
of less than $1 at March 31, 2016 and December 31, 2015

Materials and supplies, net of allowance for obsolescence
of $154 and $148 at March 31, 2016 and December 31, 2015, respectively

Assets held for sale

Restricted cash

Other current assets

Total current assets

Property and equipment

Less accumulated depreciation

Property and equipment, net

Deferred income taxes, net

Other assets

Total assets

$

$

Liabilities and equity

Accounts payable

$

$

Accrued income taxes

Debt due within one year

Other current liabilities

Total current liabilities

Long-term debt

Deferred income taxes, net

Other long-term liabilities

Total long-term liabilities

Commitments and contingencies

Redeemable noncontrolling interest

Shares, CHF 0.10 par value, 393,397,220 authorized, 167,617,649 conditionally authorized, 370,967,382 issued and 365,081,912 outstanding at March 31, 2016 and CHF 15.00 par value, 396,260,487 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 364,035,397 outstanding at December 31, 2015

Additional paid-in capital

Treasury shares, at cost, 2,863,267 held at December 31, 2015

 —

Retained earnings

Accumulated other comprehensive loss

Total controlling interest shareholders’ equity

Noncontrolling interest

Total equity

Total liabilities and equity

$

$

Three months ended 

March 31, 

2016

2015

Cash flows from operating activities

Net income (loss)

$

$

Adjustments to reconcile to net cash provided by operating activities:

Depreciation

Share-based compensation expense

Loss on impairment

(Gain) loss on disposal of assets, net

Deferred income tax benefit

Other, net

Changes in deferred revenues, net

Changes in deferred costs, net

Changes in operating assets and liabilities

Net cash provided by operating activities

Cash flows from investing activities

Capital expenditures

Proceeds from disposal of assets, net

Net cash used in investing activities

Cash flows from financing activities

Repayments of debt

Deposit to cash account restricted for financing activities

 —

Proceeds from cash investments restricted for financing activities

Distributions of qualifying additional paid-in capital

 —

Distributions to holders of noncontrolling interest

Other, net

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$

$

Operating Revenues (in millions)

Three months ended 

March 31, 

December 31, 

March 31, 

2016

2015

2015

Contract drilling revenues

Ultra-Deepwater Floaters

$

$

$

Harsh Environment Floaters

Deepwater Floaters

Midwater Floaters

High-Specification Jackups

Contract intangible revenue

Total contract drilling revenues

Other revenues

Customer early termination fees

 —

Customer reimbursement revenues and other

Total other revenues

Total revenues

$

$

$

Average Daily Revenue (1)

Three months ended 

March 31, 

December 31, 

March 31, 

2016

2015

2015

Ultra-Deepwater Floaters

$

$

$

Harsh Environment Floaters

Deepwater Floaters

Midwater Floaters

High-Specification Jackups

Total

$

$

Utilization (2)

Three months ended 

March 31, 

December 31, 

March 31, 

2016

2015

2015

Ultra-Deepwater Floaters

% 

% 

% 

Harsh Environment Floaters

% 

% 

% 

Deepwater Floaters

% 

% 

% 

Midwater Floaters

% 

% 

% 

High-Specification Jackups

% 

% 

% 

Total

% 

% 

% 

Revenue Efficiency (3)

Three months ended 

Years ended

March 31, 

December 31, 

March 31, 

December 31, 

December 31, 

2016

2015

2015

2015

2014

Ultra-Deepwater Floaters

% 

% 

% 

% 

%

Harsh Environment Floaters

% 

% 

% 

% 

%

Deepwater Floaters

% 

% 

% 

% 

%

Midwater Floaters

% 

% 

% 

% 

%

High-Specification Jackups

% 

% 

% 

% 

%

Total Drilling Fleet

% 

% 

% 

% 

%

Three months ended 

March 31, 

December 31, 

March 31, 

2016

2015

2015

Income from continuing operations before income taxes

$

$

$

Add back (subtract):

Restructuring charges

Loss on impairment of goodwill and other assets

Gain on disposal of other assets, net

Gain on retirement of debt

 —

 —

Adjusted income from continuing operations before income taxes

Income tax expense from continuing operations

Add back (subtract):

Restructuring charges

 —

Loss (gain) on impairment of goodwill and other assets

Gain on disposal of other assets, net

 —

Changes in estimates (1)

Adjusted income tax expense from continuing operations (2)

$

$

$

Effective Tax Rate (3)

%  

%  

%  

Annual Effective Tax Rate (4)

%  

%  

%  

(1)

Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation of allowances on deferred taxes and (c) other tax liabilities.

(2)

The three months December 31, 2015 includes $(6) million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate.

(3)

Effective Tax Rate is income tax expense for continuing operations, divided by income from continuing operations before income taxes.

(4)

Annual Effective Tax Rate is income tax expense for continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income from continuing operations before income tax expense excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate.

YTD

3/31/16

Adjusted Net Income

Net income (loss) attributable to controlling interest, as reported

$

Add back (subtract):

Restructuring charges

Loss on impairment of assets

Gain on disposal of assets, net

Loss from discontinued operations

Discrete tax items and other, net

Net income, as adjusted

$

Adjusted Diluted Earnings Per Share:

Diluted earnings (loss) per share, as reported

$

Add back (subtract):

Restructuring charges

Loss on impairment of assets

 —

Gain on disposal of assets, net

 —

Loss from discontinued operations

 —

Discrete tax items and other, net

 —

Diluted earnings per share, as adjusted

$

YTD

QTD

YTD

QTD

YTD

QTD

QTD

12/31/15

12/31/15

09/30/15

09/30/15

06/30/15

06/30/15

03/31/15

Adjusted Net Income

Net income (loss) attributable to controlling interest, as reported

$

$

$

$

$

$

$

Add back (subtract):

Litigation matters

 —

 —

 —

Restructuring charges

Loss on impairment of assets

Gain on disposal of assets, net

Gain on retirement of debt

 —

 —

 —

Gain on disposal of assets in discontinued operations

 —

 —

 —

 —

(Income) loss from discontinued operations

Discrete tax items and other, net

 —

Net income, as adjusted

$

$

$

$

$

$

$

Adjusted Diluted Earnings Per Share:

Diluted earnings (loss) per share, as reported

$

$

$

$

$

$

$

Add back (subtract):

Litigation matters

 —

 —

 —

Restructuring charges

 —

Loss on impairment of assets

Gain on disposal of assets, net

 —

 —

Gain on retirement of debt

 —

 —

 —

Gain on disposal of assets in discontinued operations

 —

 —

 —

 —

 —

 —

 —

(Income) loss from discontinued operations

 —

 —

 —

 —

 —

 —

Discrete tax items and other, net

 —

 —

 —

Diluted earnings per share, as adjusted

$