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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (date of earliest event reported): February 22, 2023

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TRANSOCEAN LTD.

(Exact name of registrant as specified in its charter)

Switzerland

001-38373

98-0599916

(State or other jurisdiction of incorporation or organization)

(Commission file number)

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

Turmstrasse 30

Steinhausen, Switzerland

CH-6312

(Address of principal executive offices)

(Zip Code)

+41 (41) 749-0500

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Shares, CHF 0.10 par value

RIG

New York Stock Exchange

0.50% Exchangeable Senior Bonds due 2023

RIG/23

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 7.01. Regulation FD Disclosure

Furnished as Exhibit 99.1 to this Current Report on Form 8-K are the Company’s consolidated Swiss statutory financial statements, which comprise the consolidated balance sheets as of December 31, 2022 and 2021 and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows and notes thereto for each of the three years in the period ended December 31, 2022, which financial statements and reports thereon are incorporated herein by reference.

Furnished as Exhibit 99.2 to this Current Report on Form 8-K are the Company’s standalone Swiss statutory financial statements, which comprise the statement of operations, balance sheet and notes for the year ended December 31, 2022, which financial statements and reports thereon are incorporated herein by reference.

The information in this Current Report on Form 8-K is being “furnished” pursuant to Item 7.01 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any Company filing, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01. Financial Statements and Exhibits

(d)  Exhibits

The exhibits to this report furnished pursuant to Item 9.01 are as follows:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

TRANSOCEAN LTD.

Date: February 22, 2023

By

/s/ Daniel Ro-Trock

Daniel Ro-Trock

Authorized Person

Exhibit 99.1

TRANSOCEAN LTD.

STATUTORY CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2022, 2021 and 2020


THIS PAGE INTENTIONALLY LEFT BLANK


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Ernst & Young AG

Maagplatz 1

P.O. Box

8005 Zurich

Phone: +41 58 286 31 11

Fax: +41 58 286 30 04

www.ey.com/ch

To the General Meeting of

Zurich, February 22, 2023

Transocean Ltd., Steinhausen

Report of the statutory auditor on the consolidated financial statements

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Opinion

We have audited the accompanying consolidated financial statements of Transocean Ltd. and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles (US GAAP) and comply with Swiss law.

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Basis for opinion

We conducted our audit in accordance with Swiss law, Swiss Standards on Auditing (SA-CH) and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB standards). Our responsibility is to express an opinion on these consolidated financial statements based on our audit and our responsibilities under those provisions and standards are further described in the “Auditor's responsibilities for the audit of the consolidated financial statements” section of our report. We are a public accounting firm and are independent of the Group in accordance with the provisions of Swiss law U.S. federal securities law, together with the requirements of the Swiss audit profession, the U.S. Securities and Exchange Commission and the PCAOB and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

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Critical audit matters

The critical audit matters communicated below are the matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the Audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Income Taxes

Description of the Matter

As discussed in Notes 2 and 10 to the consolidated financial statements, the Company operates in multiple jurisdictions through a complex operating structure and is subject to applicable tax laws, treaties or regulations in each jurisdiction where it operates. The Company’s provision for income taxes is based on the tax laws and rates applicable in each jurisdiction. The Company recognizes tax benefits they believe are more likely than not to be sustained upon examination by the taxing authorities based on the technical merits of the position.

Auditing management’s provision for income taxes and related deferred taxes was complex because of the Company’s multi-national operating structure.  In addition, a higher degree of auditor judgment was required to evaluate the Company’s deferred tax provision as a result of the Company’s interpretation of tax law in certain jurisdictions across its multiple subsidiaries.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s income tax provision process, including controls over management’s review of the identification and valuation of deferred income taxes and changes in tax laws and regulations that may impact the Company’s deferred income tax provision.

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Our audit procedures also included, among others, (i) obtaining an understanding of the Company’s overall tax structure, evaluating changes in the Company’s tax structure that occurred during the year as well as changes in tax law, and assessing the interpretation of those changes under the relevant jurisdiction’s tax law; (ii) utilizing tax resources with appropriate knowledge of local jurisdictional laws and regulations; (iii) evaluating the completeness and accuracy of deferred income taxes, and (iv) assessing the reasonableness of the Company’s valuation allowance on deferred tax assets, including projections of taxable income from the future reversal of existing taxable temporary differences.

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Other information

The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements, the remuneration report and our auditor’s reports thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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Board of Directors’ responsibilities for the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with US GAAP and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so

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Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, SA-CH and PCAOB standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Swiss law, SA-CH and PCAOB standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up

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to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Board of Directors and the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Board of Directors and the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters arising from the audit of the consolidated financial statements that were communicated or required to be communicated to the Board of Directors and the Audit Committee, we determine those matters that related to accounts or disclosures that are material to the consolidated financial statements and involved especially challenging, subjective, or complex auditor judgment in the current period and are therefore critical audit matters.

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Report on other legal requirements

In accordance with Art. 728a para. 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists, which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

We have served as the Group’s auditor since 2008.

Ernst & Young Ltd

/s/ Reto Hofer

/s/ Ralph Petermann

Licensed audit expert

Certified public accountant

(Auditor in charge)

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

Years ended December 31, 

 

 

2022

    

2021

    

2020

  

 

Contract drilling revenues

$

2,575

$

2,556

 

$

3,152

Costs and expenses

Operating and maintenance

1,679

1,697

2,000

Depreciation and amortization

735

742

781

General and administrative

182

167

183

2,596

2,606

2,964

Loss on impairment

(597)

Loss on disposal of assets, net

(10)

(62)

(84)

Operating loss

(31)

(112)

(493)

Other income (expense), net

Interest income

27

15

21

Interest expense, net of amounts capitalized

(561)

(447)

(575)

Gain on restructuring and retirement of debt

8

51

533

Other, net

(5)

23

(27)

(531)

(358)

(48)

Loss before income tax expense

(562)

(470)

(541)

Income tax expense

59

121

27

Net loss

(621)

(591)

(568)

Net income (loss) attributable to noncontrolling interest

1

(1)

Net loss attributable to controlling interest

$

(621)

$

(592)

 

$

(567)

Loss per share, basic and diluted

$

(0.89)

$

(0.93)

 

$

(0.92)

Weighted-average shares, basic and diluted

699

637

615

See accompanying notes.

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

Years ended December 31, 

 

    

2022

    

2021

    

2020

  

 

Net loss

$

(621)

$

(591)

$

(568)

Net income (loss) attributable to noncontrolling interest

1

(1)

Net loss attributable to controlling interest

(621)

(592)

(567)

Components of net periodic benefit (income) costs before reclassifications

(109)

175

38

Components of net periodic benefit costs reclassified to net loss

3

10

25

Other comprehensive income (loss) before income taxes

(106)

185

63

Income taxes related to other comprehensive income (loss)

5

(6)

(2)

Other comprehensive income (loss)

(101)

179

61

Other comprehensive income attributable to noncontrolling interest

Other comprehensive income (loss) attributable to controlling interest

(101)

179

61

Total comprehensive loss

(722)

(412)

(507)

Total comprehensive income (loss) attributable to noncontrolling interest

1

(1)

Total comprehensive loss attributable to controlling interest

$

(722)

$

(413)

$

(506)

See accompanying notes.

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

December 31, 

 

 

2022

    

2021

  

 

Assets

Cash and cash equivalents

$

683

$

976

Accounts receivable, net

485

492

Materials and supplies, net

388

392

Restricted cash and cash equivalents

308

436

Other current assets

144

148

Total current assets

2,008

2,444

Property and equipment

24,217

23,152

Less accumulated depreciation

(6,748)

(6,054)

Property and equipment, net

17,469

17,098

Contract intangible assets

56

173

Deferred tax assets, net

13

7

Other assets

890

959

Total assets

$

20,436

$

20,681

Liabilities and equity

Accounts payable

$

281

$

228

Accrued income taxes

19

17

Debt due within one year

719

513

Other current liabilities

539

545

Total current liabilities

1,558

1,303

Long-term debt

6,628

6,657

Deferred tax liabilities, net

493

447

Other long-term liabilities

965

1,068

Total long-term liabilities

8,086

8,172

Commitments and contingencies

Shares, CHF 0.10 par value, 905,093,509 authorized, 142,362,675 conditionally authorized, 797,244,753 issued

and 721,888,427 outstanding at December 31, 2022, and 891,379,306 authorized, 142,363,356 conditionally

authorized, 728,176,456 issued and 655,505,335 outstanding at December 31, 2021

71

64

Additional paid-in capital

13,984

13,683

Accumulated deficit

(3,079)

(2,458)

Accumulated other comprehensive loss

(185)

(84)

Total controlling interest shareholders’ equity

10,791

11,205

Noncontrolling interest

1

1

Total equity

10,792

11,206

Total liabilities and equity

$

20,436

$

20,681

See accompanying notes.

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(in millions)

Years ended December 31, 

Years ended December 31, 

 

2022

  

2021

  

2020

  

2022

  

2021

  

2020

 

Shares

Balance, beginning of period

655

615

612

$

64

$

60

$

59

Issuance of shares

67

40

3

7

4

1

Balance, end of period

722

655

615

$

71

$

64

$

60

Additional paid-in capital

Balance, beginning of period

$

13,683

$

13,501

$

13,424

Share-based compensation

29

28

31

Issuance of shares

256

154

(1)

Issuance of warrants

16

Equity component of convertible debt instruments

46

Other, net

1

Balance, end of period

$

13,984

$

13,683

$

13,501

Accumulated deficit

Balance, beginning of period

$

(2,458)

$

(1,866)

$

(1,297)

Net loss attributable to controlling interest

(621)

(592)

(567)

Effect of adopting accounting standards update

(2)

Balance, end of period

$

(3,079)

$

(2,458)

$

(1,866)

Accumulated other comprehensive loss

Balance, beginning of period

$

(84)

$

(263)

$

(324)

Other comprehensive income (loss) attributable to controlling interest

(101)

179

61

Balance, end of period

$

(185)

$

(84)

$

(263)

Total controlling interest shareholders’ equity

Balance, beginning of period

$

11,205

$

11,432

$

11,862

Total comprehensive loss attributable to controlling interest

(722)

(413)

(506)

Share-based compensation

29

28

31

Issuance of shares

263

158

Issuance of warrants

16

Equity component of convertible debt instruments

46

Other, net

(1)

Balance, end of period

$

10,791

$

11,205

$

11,432

Noncontrolling interest

Balance, beginning of period

$

1

$

3

$

5

Total comprehensive income (loss) attributable to noncontrolling interest

1

(1)

Acquisition of noncontrolling interest

(3)

Other, net

(1)

Balance, end of period

$

1

$

1

$

3

Total equity

Balance, beginning of period

$

11,206

$

11,435

$

11,867

Total comprehensive loss

(722)

(412)

(507)

Share-based compensation

29

28

31

Issuance of shares

263

158

Issuance of warrants

16

Acquisition of noncontrolling interest

(3)

Equity component of convertible debt instruments

46

Other, net

(2)

Balance, end of period

$

10,792

$

11,206

$

11,435

See accompanying notes.

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Years ended December 31, 

 

2022

    

2021

    

2020

  

   

 

Cash flows from operating activities

Net loss

$

(621)

$

(591)

$

(568)

Adjustments to reconcile to net cash provided by operating activities:

Contract intangible asset amortization

117

220

215

Depreciation and amortization

735

742

781

Share-based compensation expense

29

28

31

Loss on impairment

597

Loss on impairment of investment in unconsolidated affiliates

37

62

Loss on disposal of assets, net

10

62

84

Fair value adjustment to bifurcated compound exchange feature

157

Gain on restructuring and retirement of debt

(8)

(51)

(533)

Deferred income tax expense

46

128

60

Other, net

77

77

83

Changes in deferred revenues, net

(20)

(108)

(73)

Changes in deferred costs, net

1

(6)

12

Changes in other operating assets and liabilities, net

(75)

37

(353)

Net cash provided by operating activities

448

575

398

Cash flows from investing activities

Capital expenditures

(717)

(208)

(265)

Investments in equity of unconsolidated affiliates

(42)

(1)

(19)

Investments in loans to unconsolidated affiliates

(5)

(33)

(2)

Proceeds from disposal of assets, net

7

9

24

Proceeds from maturities of unrestricted and restricted investments

5

Net cash used in investing activities

(757)

(233)

(257)

Cash flows from financing activities

Repayments of debt

(554)

(606)

(1,637)

Proceeds from issuance of shares, net of issue costs

263

158

Proceeds from issuance of debt, net of issue costs

175

743

Proceeds from issuance of warrants, net of issue costs

12

Other, net

(8)

(42)

(36)

Net cash used in financing activities

(112)

(490)

(930)

Net decrease in unrestricted and restricted cash and cash equivalents

(421)

(148)

(789)

Unrestricted and restricted cash and cash equivalents, beginning of period

1,412

1,560

2,349

Unrestricted and restricted cash and cash equivalents, end of period

$

991

$

1,412

$

1,560

See accompanying notes.

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

Note 1—Business

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells.  As of December 31, 2022, we owned or had partial ownership interests in and operated a fleet of 38 mobile offshore drilling units, consisting of 28 ultra-deepwater floaters and 10 harsh environment floaters.  As of December 31, 2022, we were constructing one ultra-deepwater drillship and held a noncontrolling ownership interest in a company that is constructing one ultra-deepwater drillship.

We provide, as our primary business, contract drilling services in a single operating segment, which involves contracting our mobile offshore drilling rigs, related equipment and work crews to drill oil and gas wells.  We specialize in technically demanding regions of the global offshore drilling business with a particular focus on ultra-deepwater and harsh environment drilling services.  Our drilling fleet is one of the most versatile fleets in the world, consisting of drillships and semisubmersible floaters used in support of offshore drilling activities and offshore support services on a worldwide basis.

We perform contract drilling services by deploying our high-specification fleet in a single, global market that is geographically dispersed in oil and gas exploration and development areas throughout the world.  The location of our rigs and the allocation of our resources to build or upgrade rigs are determined by the activities and needs of our customers.

Note 2—Significant Accounting Policies

Accounting estimates—To prepare financial statements in accordance with accounting principles generally accepted in the United States (“U.S.”), we must make judgments by applying estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates and assumptions, including those related to our income taxes, property and equipment, equity investments, contingencies, allowance for excess materials and supplies, intangibles, postemployment benefit plans and share-based compensation.  We base our estimates and assumptions on historical experience and other factors that we believe are reasonable.  Actual results could differ from such estimates.

Fair value measurements—We estimate fair value at an exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  Our valuation techniques require inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) significant observable inputs, including unadjusted quoted prices for identical assets or liabilities in active markets (“Level 1”), (2) significant other observable inputs, including direct or indirect market data for similar assets or liabilities in active markets or identical assets or liabilities in less active markets (“Level 2”) and (3) significant unobservable inputs, including those that require considerable judgment for which there is little or no market data (“Level 3”).  When a valuation requires multiple input levels, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.

Consolidation—We consolidate entities in which we have a majority voting interest and entities that meet the criteria for variable interest entities for which we are deemed to be the primary beneficiary for accounting purposes.  We eliminate intercompany transactions and accounts in consolidation.  We apply the equity method of accounting for an equity investment in an unconsolidated entity if we have the ability to exercise significant influence over the entity that (a) does not meet the variable interest entity criteria or (b) meets the variable interest entity criteria, but for which we are not deemed to be the primary beneficiary.  We measure other equity investments at fair value if the investment has a fair value that is readily determinable; otherwise, we measure the investment at cost, less any impairment.  We separately present within equity on our consolidated balance sheets the ownership interests attributable to parties with noncontrolling interests in our consolidated subsidiaries, and we separately present net income attributable to such parties on our consolidated statements of operations.  See Note 3—Unconsolidated Affiliates and Note 13—Equity.

Revenues and related pre-operating costs—We recognize revenues earned under our drilling contracts based on variable dayrates, which range from a full operating dayrate to lower rates or zero rates for periods when drilling operations are interrupted or restricted, based on the specific activities we perform during the contract on an hourly, or more frequent, basis.  Such dayrate consideration is attributed to the distinct time period to which it relates within the contract term, and therefore, is recognized as we perform the services.  When the operating dayrate declines over the contract term, we recognize revenues on a straight-line basis over the estimated contract period.  We recognize reimbursement revenues and the corresponding costs as we provide the customer-requested goods and services, when such reimbursable costs are incurred while performing drilling operations.  Prior to performing drilling operations, we may receive pre-operating revenues, on either a fixed lump-sum or variable dayrate basis, for mobilization, contract preparation, customer-requested goods and services or capital upgrades, for which we record a contract liability and recognize as revenues on a straight-line basis over the estimated contract period.  We recognize losses for loss contracts as such losses are incurred.  We recognize revenues for demobilization over the contract period unless otherwise constrained.  We recognize revenues from contract terminations as we fulfill our obligations and all contingencies have been resolved.  We apply the optional exemption that permits us to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is

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Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued

typically based on a single performance obligation consisting of a series of distinct hourly, or more frequent, periods, the variability of which will be resolved at the time of the future services.

To obtain contracts with our customers, we incur pre-operating costs to prepare a rig for contract and mobilize a rig to the drilling location.  We defer such pre-operating contract preparation and mobilization costs for recognition in operating and maintenance costs over the estimated contract period on a straight-line basis, consistent with the general pace of activity.  See Note 4—Revenues.

Contract intangible assets—We recognize contract intangible assets related to acquired executory contracts, such as drilling contracts.  The drilling contract intangible assets represent the amount by which the fixed dayrates of the acquired contracts were above the market dayrates that were available or expected to be available during the term of the contract for similar contracts, measured as of the acquisition date.  We amortize the carrying amount of the drilling contract intangible assets using the straight-line method as a reduction of contract drilling revenues over the expected remaining contract period.  See Note 5—Contract Intangible Assets.

Share-based compensation—To measure the fair values of granted or modified service-based restricted share units, we use the market price of our shares on the grant date or modification date.  To measure the fair values of granted or modified stock options, we use the Black-Scholes-Merton option-pricing model and apply assumptions for the expected life, risk-free interest rate, expected volatility and dividend yield.  To measure the fair values of granted or modified performance-based restricted share units subject to market factors, we use a Monte Carlo simulation model and, in addition to the assumptions applied for the Black-Scholes-Merton option-pricing model, we use a risk neutral approach and an average price at the performance start date.  To measure the fair values of granted or modified performance-based restricted share units that are subject to performance targets, we use the market price of our shares on the grant date or modification date adjusted for the projected performance rate expected to be achieved at the end of the measurement period.  We recognize share-based compensation expense in the same financial statement line item as cash compensation paid to the respective employees or non-employee directors.  We recognize such compensation expense on a straight-line basis over the service period through the date the employee or non-employee director is no longer required to provide service to earn the award.  See Note 14—Share-Based Compensation.

Capitalized interest—We capitalize interest costs for qualifying construction and upgrade projects and only capitalize interest costs during periods in which progress for the construction projects continues to be underway.  In the years ended December 31, 2022, 2021 and 2020, we capitalized interest costs of $73 million, $50 million and $47 million, respectively, for our construction work in progress.

Functional currency—We consider the U.S. dollar to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.  We recognize currency exchange rate gains and losses in other, net.  In the years ended December 31, 2022, 2021 and 2020, we recognized a net loss of $8 million, $1 million and $8 million, respectively, related to currency exchange rates.

Income taxes—We provide for income taxes based on expected taxable income, statutory rates, tax laws and tax planning opportunities available to us in the jurisdictions in which we operate or have a taxable presence.  We recognize the effect of changes in tax laws as of the date of enactment.  We recognize potential global intangible low-taxed income inclusions as a period cost.

We maintain liabilities for estimated tax exposures in our jurisdictions of operation, and we recognize the provisions and benefits resulting from changes to those liabilities in our income tax expense or benefit along with related interest and penalties.  Income tax exposure items include potential challenges to permanent establishment positions, intercompany pricing, disposition transactions, and withholding tax rates and their applicability.  These tax exposures are resolved primarily through the settlement of audits within these tax jurisdictions or by judicial means, but can also be affected by changes in applicable tax law or other factors, which could cause us to revise past estimates.

We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which the deferred tax assets and liabilities are expected to be recovered or paid.  In evaluating our ability to realize deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses in recent years.  We record a valuation allowance for deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.  For example, we may record a valuation allowance for deferred tax assets resulting from net operating losses incurred during the year in certain jurisdictions for which the benefit of the losses will not be realized or for foreign tax credit carryforwards that may expire prior to their utilization.  See Note 10—Income Taxes.

Cash and cash equivalents—We consider cash equivalents to include highly liquid debt instruments with original maturities of three months or less, such as time deposits with commercial banks that have high credit ratings, U.S. Treasury and government securities, Eurodollar time deposits, certificates of deposit and commercial paper.  We may also invest excess funds in no-load, open-ended, management investment trusts.  Such management trusts invest exclusively in high-quality money market instruments.

Restricted cash and cash equivalents—We maintain restricted cash and cash equivalents that are either pledged for debt service under certain bond indentures, as required under certain bank credit arrangements, or held in accounts that are subject to restrictions due to legislation, regulation or court order.  We classify such restricted cash and cash equivalents in current assets if the restriction is

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expected to expire or otherwise be resolved within one year or if such funds are considered to offset liabilities that are properly classified as current liabilities. See Note 8—Debt and Note 12—Commitments and Contingencies.

Materials and supplies—We record materials and supplies at their average cost less an allowance for excess items.  We estimate the allowance for excess items based on historical experience and expectations for future use of the materials and supplies.  During the year ended December 31, 2021, we identified certain materials and supplies that were in excess of our expected future usage based on our current market outlook, and as a result of these items, we increased our allowance by $28 million ($0.04 per diluted share, net of tax).  At December 31, 2022 and 2021, our allowance for excess items was $199 million and $183 million, respectively.

Assets held for sale—We classify an asset as held for sale when the facts and circumstances meet the criteria for such classification, including the following: (a) we have committed to a plan to sell the asset, (b) the asset is available for immediate sale, (c) we have initiated actions to complete the sale, including locating a buyer, (d) the sale is expected to be completed within one year, (e) the asset is being actively marketed at a price that is reasonable relative to its fair value, and (f) the plan to sell is unlikely to be subject to significant changes or termination.  At December 31, 2022 and 2021, we had no assets classified as held for sale.

Property and equipment—We apply judgment to account for our property and equipment, consisting primarily of offshore drilling rigs and related equipment, related to estimates and assumptions for cost capitalization, useful lives and salvage values.  We base our estimates and assumptions on historical experience and expectations regarding future industry conditions and operations.  At December 31, 2022, the aggregate carrying amount of our property and equipment represented approximately 85 percent of our total assets.

We capitalize expenditures for newbuilds, renewals, replacements and improvements, including capitalized interest, if applicable, and we recognize the expense for maintenance and repair costs as incurred.  For newbuild construction projects, we also capitalize the initial preparation, mobilization and commissioning costs incurred until the drilling unit is placed into service.  Upon sale or other disposition of an asset, we recognize a net gain or loss on disposal of the asset, which is measured as the difference between the net carrying amount of the asset and the net proceeds received.  We compute depreciation using the straight-line method after allowing for salvage values.

The estimated original useful life of our drilling units is 35 years, our buildings and improvements range from three to 30 years and our machinery and equipment range from four to 20 years.  We reevaluate the remaining useful lives and salvage values of our rigs when certain events occur that directly impact the useful lives and salvage values of the rigs, including changes in operating condition, functional capability and market and economic factors.  When evaluating the remaining useful lives of rigs, we also consider major capital upgrades required to perform certain contracts and the long-term impact of those upgrades on future marketability.

Long-lived asset impairment—We review the carrying amounts of long-lived assets, including property and equipment and right-of-use assets, for potential impairment when events occur or circumstances change that indicate that the carrying amount of such assets may not be recoverable.  For assets classified as held and used, we determine recoverability by evaluating the estimated undiscounted future net cash flows based on projected dayrates and utilization of the asset group under review.  We consider our asset groups to be ultra-deepwater floaters and harsh environment floaters.  When an impairment of one or more of our asset groups is indicated, we measure the impairment as the amount by which the asset group’s carrying amount exceeds its estimated fair value.  We measure the fair values of our asset groups by applying a variety of valuation methods, incorporating a combination of income, market and cost approaches, using projected discounted cash flows and estimates of the exchange price that would be received for the assets in the principal or most advantageous market for the assets in an orderly transaction between market participants as of the measurement date.  For an asset classified as held for sale, we consider the asset to be impaired to the extent its carrying amount exceeds its estimated fair value less cost to sell.  See Note 6—Long-Lived Assets.

Equity investments and impairment—We review our equity-method investments, and other equity investments for which a readily determinable fair value is not available, for potential impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable in the near term.  If we determine that an impairment that is other than temporary exists, we recognize an impairment loss, measured as the amount by which the carrying amount of the investment exceeds its estimated fair value.  To estimate the fair value of the investment, we apply valuation methods that rely primarily on the income and market approaches.  In the years ended December 31, 2021 and 2020, we recognized a loss of $37 million and $62 million, respectively, associated with the other-than-temporary impairment of the carrying amount of our equity investments.  We amortize the basis difference caused by such impairments using the straight-line method over the estimated life of the asset.  See Note 3—Unconsolidated Affiliates.

Pension and other postemployment benefit plans—We use a measurement date of January 1 for determining net periodic benefit costs and December 31 for determining plan benefit obligations and the fair values of plan assets.  We determine our net periodic benefit costs based on a market-related value of assets that reduces year-to-year volatility by including investment gains or losses subject to amortization over a five-year period from the year in which they occur.  We calculate investment gains or losses for this purpose as the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets.  If gains or losses exceed 10 percent of the greater of plan assets or plan liabilities, we amortize such gains or losses over the average expected future service period of the employee participants.

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We measure the actuarially determined obligations and related costs for our defined benefit pension and other postemployment benefit plans, retiree life insurance and medical benefits, by applying assumptions, the most significant of which include long-term rate of return on plan assets, discount rates and mortality rates.  For the long-term rate of return, we develop our assumptions regarding the expected rate of return on plan assets based on historical experience and projected long-term investment returns, and we weight the assumptions based on each plan’s asset allocation.  For the discount rate, we base our assumptions on a yield curve approach using Aa-rated corporate bonds and the expected timing of future benefit payments.  At December 31, 2022 and 2021, the funded status of our pension and other postemployment benefit plans represented an aggregate liability of $174 million and $132 million, respectively, and an aggregate asset of $44 million and $102 million, respectively.  See Note 9—Postemployment Benefit Plans.

Contingencies—We assess our contingencies on an ongoing basis to evaluate the appropriateness of our liabilities and disclosures for such contingencies.  We establish liabilities for estimated loss contingencies when we believe a loss is probable and the amount of the probable loss can be reasonably estimated.  Once established, we adjust the carrying amount of a contingent liability upon the occurrence of a recognizable event when facts and circumstances change, altering our previous assumptions with respect to the likelihood or amount of loss.  We recognize corresponding assets for those loss contingencies that we believe are probable of being recovered through insurance.  We recognize expense for legal costs as they are incurred, and we recognize a corresponding asset for such legal costs only if we expect such legal costs to be recovered through insurance.

Note 3—Unconsolidated Affiliates

Equity investments

Overview—We hold noncontrolling equity investments in various unconsolidated companies, including (a) our 33 percent ownership interest in Orion Holdings (Cayman) Limited (together with its subsidiary, “Orion”), a Cayman Islands company that owns the harsh environment floater Transocean Norge, (b) our 20 percent ownership interest in Liquila Ventures Ltd. (together with its subsidiaries, “Liquila”), a Bermuda company formed to construct, own and operate the newbuild ultra-deepwater drillship Deepwater Aquila, (c) our 20 percent ownership interest in Nauticus Robotics, Inc., a publicly traded company that develops highly sophisticated, ultra-sustainable marine robots and intelligent software to power them, (d) our interests in Ocean Minerals LLC, the parent company of Moana Minerals Ltd., a Cook Islands subsea resource development company that intends to explore and extract polymetallic nodules, and (e) our interests in certain other companies that are involved in researching and developing technology to improve efficiency, reliability, sustainability and safety for drilling and other activities.  In the years ended December 31, 2022, 2021 and 2020, we recognized a net loss of $24 million, $10 million and $10 million, respectively, recorded in other income and expense, associated with equity in losses of our equity investments.  At December 31, 2022 and 2021, the aggregate carrying amount of our equity investments was $113 million and $91 million, respectively, recorded in other assets.

In November 2022, we and Perestroika AS (“Perestroika”), an entity affiliated with one of our directors that beneficially owns approximately 11 percent of our shares, each made a cash contribution of $15 million and $10 million, respectively, to Liquila.  The investments represented proportionate contributions, together with a contribution from the holder of the remaining 67 percent ownership interest, that were used to make the initial payment to the shipyard to acquire a newbuild drillship for a purchase price of approximately $200 million.  We concluded that Liquila is a variable interest entity because its equity at risk was insufficient to permit it to carry on its activities without additional subordinated financial support, and we further concluded that we are not the primary beneficiary since the power to direct the activities that most significantly impact its economic performance are jointly controlled.  The holder of the remaining 67 percent ownership interest in Liquila may, at any time through November 10, 2023, elect to require us to repurchase up to 80 percent of such holder’s initial investment at the value that the holder initially paid therefor.  We may, at our election, settle any such repurchase by delivering cash, Transocean Ltd. shares or a combination of cash and shares, where any shares delivered would be valued using the then-current market price of shares.  At December 31, 2022, the carrying amount of our investment in Liquila was $15 million, recorded in other assets.

Impairments—Our equity-method investment in Orion is the most significant of our equity investments.  In the years ended December 31, 2021 and 2020, we recognized a loss of $37 million and $59 million, respectively, which had no tax effect, recorded in other, net, associated with the impairment of our equity investment in Orion upon determination that the carrying amount exceeded the estimated fair value and that the impairment was other than temporary.  We estimated the fair value of our investment by applying the income method using significant unobservable inputs, representative of Level 3 fair value measurements, including an assumed discount rate of 12 percent and assumptions about the future performance of the investment, such as future demand and supply for harsh environment floaters, rig utilization, revenue efficiency and dayrates.  At December 31, 2022 and 2021, the aggregate carrying amount of our equity investment in Orion was $54 million and $57 million, respectively.

Related party transactions—We engage in certain related party transactions with our unconsolidated affiliates, the most significant of which are under agreements with Orion.  We operate, stack and maintain Transocean Norge under a management services agreement, and we market Transocean Norge under a marketing services agreement.  During operations, we lease Transocean Norge under a short-term bareboat charter agreement, the next of which is expected to begin in May 2023 and expire in January 2024.  In addition to our ownership interest in Liquila, we maintain the exclusive right to market, and once it is placed into service, manage the operations of the rig

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under a master services agreement.  Additionally, we procure and provide services and equipment from and to other unconsolidated affiliates for technological innovation and subsea minerals exploration.

In the years ended December 31, 2022, 2021 and 2020, we received an aggregate cash payment of $40 million, $16 million and $46 million, respectively, primarily for services performed under the management services agreement with Orion.  In the years ended December 31, 2022, 2021 and 2020, we recognized rent expense of $11 million, $12 million and $22 million, respectively, recorded in operating and maintenance costs, and made an aggregate cash payment of $10 million, $15 million and $22 million, respectively, to charter the rig and rent other equipment from Orion.  In the years ended December 31, 2022, 2021 and 2020, we made an aggregate cash payment of $7 million, $6 million and $15 million, respectively, to other unconsolidated affiliates for research and development and for equipment to reduce emissions and improve reliability.

In June 2021, Orion refinanced its shipyard loans under a financing arrangement for $100 million, , and we made a cash investment of $33 million in the loan facility.  The financing arrangement, which expires in June 2024, requires interest to be paid on outstanding borrowings at the London Interbank Offered Rate plus a margin of 6.50 percent per annum.  Borrowings under the financing arrangement are secured by Transocean Norge.  At December 31, 2022 and 2021, the aggregate principal amount due to us under the various financing arrangements with our unconsolidated affiliates was $41 million and $36 million, respectively, recorded in other assets.

Subsequent event

In February 2023, we agreed to make an investment for a noncontrolling ownership interest in Global Sea Mineral Resources, a Belgian company and leading developer of nodule collection technology, which is engaged in the development and exploration of deep-sea polymetallic nodules that contain metals critical to the growing renewable energy market.  In addition to a cash investment of $10 million, we agreed to contribute the ultra-deepwater drillship Ocean Rig Olympia, and we expect to contribute engineering services in the future.  In the three months ending March 31, 2023, we expect to recognize a material loss associated with the contribution of the rig and related assets.

Note 4—Revenues

Overview—We earn revenues primarily by performing the following activities: (i) providing our drilling rig, work crews, related equipment and services necessary to operate the rig (ii) delivering the drilling rig by mobilizing to and demobilizing from the drill location, and (iii) performing certain pre-operating activities, including rig preparation activities or equipment modifications required for the contract.  These services represent a single performance obligation under most all of our drilling contracts with customers that is satisfied over time, the duration of which varies by contract.  At December 31, 2022, the drilling contract with the longest expected remaining duration, excluding unexercised options, extends through July 2029.

Disaggregation—Our contract drilling revenues, disaggregated by asset group and by country in which they were earned, were as follows (in millions):

Year ended December 31, 2022

Year ended December 31, 2021

Year ended December 31, 2020

Ultra-

  

Harsh

Ultra-

Harsh

Ultra-

Harsh

deepwater

  

environment

deepwater

environment

deepwater

environment

Midwater

floaters

  

floaters

Total

floaters

floaters

Total

floaters

floaters

floaters

Total

U.S.

 

$

1,135

$

$

1,135

$

1,096

$

2

$

1,098

$

1,302

$

$

$

1,302

Norway

835

835

790

790

876

876

Other countries (a)

573

32

605

624

44

668

792

170

12

974

Total contract drilling revenues

 

$

1,708

$

867

$

2,575

$

1,720

$

836

$

2,556

$

2,094

$

1,046

$

12

$

3,152


(a)The aggregate contract drilling revenues earned in other countries that individually represented less than 10 percent of total contract drilling revenues.

Major customers—For the year ended December 31, 2022, Shell plc (together with its affiliates, “Shell”), Equinor ASA (together with its affiliates, “Equinor”) and Petróleo Brasileiro S.A. represented approximately 33 percent, 25 percent and 11 percent, respectively, of our consolidated operating revenues.  For the year ended December 31, 2021, Shell and Equinor represented approximately 31 percent and 30 percent, respectively, of our consolidated operating revenues.  For the year ended December 31, 2020, Shell, Equinor and Chevron Corporation represented approximately 28 percent, 27 percent and 14 percent, respectively, of our consolidated operating revenues.

Contract liabilities—Contract liabilities for our contracts with customers were as follows (in millions):

December 31, 

    

2022

    

2021

 

Deferred contract revenues, recorded in other current liabilities

 

$

124

$

83

Deferred contract revenues, recorded in other long-term liabilities

204

265

Total contract liabilities

 

$

328

$

348

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Significant changes in contract liabilities were as follows (in millions):

Years ended

December 31, 

    

2022

    

2021

 

Total contract liabilities, beginning of period

$

348

$

456

Decrease due to recognition of revenues for goods and services

(119)

(149)

Increase due to goods and services transferred over time

99

41

Total contract liabilities, end of period

$

328

$

348

Performance obligations satisfied in prior periods—In June 2020, we entered into a settlement and mutual release agreement with a customer, which provided for the final settlement of disputes related to performance obligations satisfied in prior periods.  In connection with the settlement, among other things, our customer agreed to pay us $185 million in four equal installments through January 15, 2023.  In the year ended December 31, 2020, we recognized revenues of $177 million, representing the discounted value of the future payments, and recorded corresponding accounts receivable, net of imputed interest.  In each of the three years ended December 31, 2022, we received an aggregate cash payment of $46 million in scheduled installments under the arrangement.  At December 31, 2022, the aggregate carrying amount of the related receivable was $46 million, net of imputed interest, recorded in accounts receivable.  At December 31, 2021, the aggregate carrying amount of the related receivable was $90 million, net of imputed interest, including $46 million and $44 million, recorded in accounts receivable and other assets, respectively.

Pre-operating costs—In the years ended December 31, 2022, 2021 and 2020, we recognized pre-operating costs of $47 million, $48 million and $60 million, respectively, recorded in operating and maintenance costs.  At December 31, 2022 and 2021, the unrecognized pre-operating costs to obtain contracts was $26 million and $21 million, respectively, recorded in other assets.

Note 5—Contract Intangible Assets

The gross carrying amount and accumulated amortization of our drilling contract intangible assets were as follows (in millions):

Year ended December 31, 2022

Year ended December 31, 2021

 

Gross

Net

Gross

Net

 

carrying

Accumulated

carrying

carrying

Accumulated

carrying

 

    

amount

amortization

amount

    

amount

    

amortization

    

amount

 

Drilling contract intangible assets

Balance, beginning of period

 

$

907

$

(734)

$

173

$

907

$

(514)

 

$

393

Amortization

(117)

(117)

(220)

(220)

Balance, end of period

 

$

907

$

(851)

$

56

$

907

$

(734)

 

$

173

As of December 31, 2022, the estimated future amortization to be recognized over the expected remaining contract periods in the years ending December 31, 2023 and 2024 was $52 million and $4 million, respectively.

Note 6—Long-Lived Assets

Disaggregation—The aggregate carrying amount of our long-lived assets, including our property and equipment and our right-of-use assets, disaggregated by country in which they were located, was as follows (in millions):

December 31, 

 

    

2022

    

2021

 

Long-lived assets

U.S.

 

$

6,514

$

5,779

Norway

3,255

3,379

Greece

3,022

3,162

Other countries (a)

5,171

5,293

Total long-lived assets

 

$

17,962

$

17,613


(a)The aggregate carrying amount of long-lived assets located in other countries that individually represented less than 10 percent of total long-lived assets.

Because the majority of our assets are mobile, the geographic locations of such assets at the end of the periods are not necessarily indicative of the geographic distribution of the operating revenues generated by such assets during the periods presented.  Our international operations are subject to certain political and other uncertainties, including risks of war and civil disturbances or other market disrupting events, expropriation of equipment, repatriation of income or capital, taxation policies, and the general hazards associated with certain areas in which we operate.  Although we are organized under the laws of Switzerland, we have minimal assets located in Switzerland, and we do not conduct any operations or earn operating revenues in Switzerland.

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Construction work in progress—The changes in our construction work in progress were as follows (in millions):

Years ended December 31, 

 

 

2022

    

2021

    

2020

 

Construction work in progress, beginning of period

$

1,017

$

828

$

753

Capital expenditures

Newbuild construction program

669

174

143

Other equipment and construction projects

48

34

122

Total capital expenditures

717

208

265

Non-cash capital additions financed under Shipyard Loans

382

Changes in accrued capital additions

3

13

(33)

Property and equipment placed into service

Newbuild construction program

(882)

Other equipment and construction projects

(42)

(32)

(157)

Construction work in progress, end of period

$

1,195

$

1,017

$

828

Impairments of assets held and used—During the year ended December 31, 2020, we identified indicators that the carrying amounts of our asset groups may not be recoverable.  Such indicators included significant declines in commodity prices and the market value of our stock, a reduction of expected demand for our drilling services as our customers announced reductions of capital investments in response to commodity prices and a reduction of projected dayrates.  As a result of our testing, we determined that the carrying amount of our midwater floater asset group was impaired.  In the year ended December 31, 2020, we recognized a loss of $31 million ($0.05 per diluted share), which had no tax effect, associated with the impairment of our midwater floater asset group.  We estimated the fair value of the rig and related assets in this asset group by applying the market approach using significant other observable inputs, representative of Level 2 fair value measurements, including the marketability of the rig and prices of comparable rigs that may be sold for scrap value.

Impairments of assets held for sale—In the year ended December 31, 2020, we recognized an aggregate loss of $556 million ($0.90 per diluted share), which had no tax effect, associated with the impairment of the ultra-deepwater floater GSF Development Driller II, the harsh environment floaters Polar Pioneer and Songa Dee and the midwater floaters Sedco 711, Sedco 714 and Transocean 712, along with related assets, which we determined were impaired at the time that we classified the assets as held for sale.  We measured the impairment of the drilling units and related assets as the amount by which the carrying amount exceeded the estimated fair value less costs to sell.  We estimated the fair value of the assets using significant other observable inputs, representative of Level 2 fair value measurements, including indicative market values for the drilling units and related assets to be sold for scrap value or binding contracts to sell such assets for alternative purposes.  If we commit to plans to sell additional rigs for values below the respective carrying amounts, we will be required to recognize additional losses in future periods associated with the impairment of such assets.

Dispositions—During the year ended December 31, 2021, in connection with our efforts to dispose of non-strategic assets, we completed the sale of the harsh environment floater Leiv Eiriksson and related assets.  During the year ended December 31, 2020, we completed the sale of the ultra-deepwater floater GSF Development Driller II, the harsh environment floaters Polar Pioneer, Songa Dee and Transocean Arctic and the midwater floaters Sedco 711, Sedco 714 and Transocean 712, along with related assets.  In the years ended December 31, 2021 and 2020, we received aggregate net cash proceeds of $4 million and $20 million, respectively, and recognized an aggregate net loss of $57 million ($0.09 per diluted share) and $61 million ($0.10 per diluted share), which had no tax effect, primarily associated with the disposal of these rigs and related assets.  In the years ended December 31, 2022, 2021 and 2020, we received aggregate net cash proceeds of $7 million, $5 million and $4 million, respectively and recognized an aggregate net loss of $10 million, $5 million and $23 million, respectively, associated with the disposal of assets unrelated to rig sales.

Note 7—Leases

Overview—Our operating leases are principally for office space, storage facilities, operating equipment and land.  At December 31, 2022, our operating leases had a weighted-average discount rate of 6.4 percent and a weighted-average remaining lease term of 12.7 years.

Our finance lease for the ultra-deepwater drillship Petrobras 10000 has an implicit interest rate of 7.8 percent and requires scheduled monthly installments through the lease expiration in August 2029, after which we are obligated to acquire the drillship from the lessor for one dollar.  We recognize expense for the amortization of the right-of-use asset in depreciation and amortization.

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Lease costs—The components of our lease costs were as follows (in millions):

Years ended December 31, 

Lease costs

2022

 

2021

 

2020

Short-term lease costs

$

14

$

17

$

27

Operating lease costs

12

12

13

Finance lease costs, amortization of right-of-use asset

20

20

21

Finance lease costs, interest on lease liability

30

33

36

Total lease costs

$

76

$

82

$

97

Lease payments—Supplemental cash flow information for our leases was as follows (in millions):

Years ended December 31, 

2022

 

2021

 

2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$

14

$

13

$

17

Operating cash flows from finance lease

8

37

36

Financing cash flows from finance lease

3

33

35

At December 31, 2022, the aggregate future minimum lease payments were as follows (in millions):

 

Operating

 

Finance

leases

lease

Years ending December 31,