Can Transocean Stock Fall 50%

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In six of the last ten years, Transocean (RIG) stock has fallen 50% or more from a high to a later low within a single calendar year. A drop of that size would not be new for its holders. Today, the main worry is the deepwater driller's debt. At the end of September, the debt stood at $5.0 billion, more than the $4.0 billion of sales the company made over the past twelve months. Is Transocean paying that debt down?

Transocean's Debt Is Shrinking But Still Heavy

Yes. Management said on its November 3, 2026 call that it has retired more than $2 billion of debt in the last 24 months, after making the balance sheet its focus. Total debt was $6.96 billion at the end of September 2024, and it has fallen in each of the two years since.

The cuts have continued since the quarter ended. On October 1, Transocean used cash on hand and restricted cash to pay off its Deepwater Aquila notes, about $200 million. On its own, before the Valaris acquisition, management expects to end 2026 with less than $4.8 billion of gross debt. That target leaves out the $5.8 billion Valaris deal, which management expects to complete in early December.

Even after those cuts, the debt is heavy next to the wider market. Transocean's total debt equals 82.2% of the market value of its shares, compared with 19.2% for the S&P 500 taken as one company.

How Much Of Transocean's Profit Reaches Shareholders?

In the September quarter, net income was $26 million, against $140 million of operating income. Over the twelve months to September, operating income was $818 million and net income was $292 million. Less than a fifth of the quarter's operating income was left as net income, as was just over a third of the twelve months' total.

The debt also has a running cost. Management expects interest expense of about $500 million for all of 2026, and said it remains focused on converting as much of every backlog dollar to cash flow as possible.

Investors pay 6.6 times the cash Transocean's operations produced over the past twelve months, compared with 15.1 times for the S&P 500. Transocean paid no dividend and bought back no stock over the past twelve months. None of that cash went to shareholders that way.

Transocean Has Most Of 2027 Already Under Contract

Transocean's contracts give holders a reason to worry less. Management said its 2027 contract coverage has improved to nearly 95%, from 81%. Transocean's backlog, the value of work already under contract, stands at about $8 billion before the Valaris deal.

By management's own measure, net debt is 2.9 times a year of earnings before interest, taxes, depreciation and amortization. That ratio is one full point lower than a year ago.

The debt is a real risk for a holder, but a shrinking one, with most of the rig work for 2027 already booked. Management plans to keep cutting debt, and it expects to address $763 million of secured notes in 2027. Shareholders of Transocean and Valaris vote on the deal on November 24, and management expects it to close on December 1. Transocean is expected to report in February 2027, when management also plans to give 2027 guidance for the combined company.

Does This Mean You Should Act On RIG?

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