Transocean Ltd

Note 4—Unconsolidated Affiliates

Equity investments

Overview—At December 31, 2023, we hold equity investments in certain unconsolidated companies, including (a) our 16 percent ownership interest in Global Sea Mineral Resources NV (together with its subsidiaries, “GSR”), 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, (b) our 33 percent ownership interest in Orion Holdings (Cayman) Limited (together with its subsidiary, “Orion”), a Cayman Islands company that owns the harsh environment floaterTransocean Norge, (c) our 19 percent ownership interest in Ocean Minerals LLC (together with its subsidiaries, “Ocean Minerals”), the parent company of Moana Minerals Ltd., a Cook Islands subsea resource development company that intends to explore and collect polymetallic nodules, (d) our 22 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, and (e) our ownership interests in other companies involved in researching and developing technology to improve efficiency, reliability, sustainability and safety for drilling and other activities.

In the years ended December 31, 2023, 2022 and 2021, we recognized a net loss of $14 million, $24 million and $10 million, respectively, recorded in other income and expense, associated with equity in losses of our equity investments. At December 31, 2023 and 2022, the aggregate carrying amount of our equity investments was $216 million and $113 million, respectively, recorded in other assets.

Contributions—In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floaterOcean Rig Olympia, which had been cold stacked, and related assets, with an estimated fair value of $85 million (see Note 7—Long-Lived Assets), in exchange for an equity ownership interest in GSR. We estimated the fair value of the rig using projected discounted cash flows, and our estimate required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including assumptions related to the future performance of the rig, projected demand for its services, rig availability and dayrates. In the year ended December 31, 2022, we made an aggregate cash contribution of $42 million for partial equity ownerships in various companies, including among others, our initial investments in Liquila Ventures Ltd. (together with its subsidiaries, “Liquila”) and Ocean Minerals.

Impairments—In the years ended December 31, 2023 and 2021, we recognized a loss of $5 million and $37 million, respectively, which had no tax effect, recorded in other, net, associated with the impairment of certain equity investments upon determination that the carrying amount exceeded the estimated fair value and that the impairment was other than temporary. For the impairment in the year ended December 31, 2021, 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.

Related party transactions

Operating activities—We engage in certain related party transactions with our unconsolidated affiliates. Our most significant transactions with our unconsolidated affiliates are under agreements with Orion as follows: (a) we operate, stack and maintainTransocean Norge under a management services agreement, (b) we marketTransocean Norge under a marketing services agreement and (c) during operations, we leaseTransocean Norge under a bareboat charter 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, 2023, 2022 and 2021, we incurred costs of approximately $55 million, $54 million and $24 million, respectively, forTransocean Norge, primarily for contract preparation and upgrade shipyard costs, which are reimbursable from Orion, the owner of the rig. In the years ended December 31, 2023, 2022 and 2021, we received an aggregate cash payment of $49 million, $40 million and $16 million, respectively, for services and equipment provided to Orion. Additionally, in the year ended December 31, 2023, we and Orion agreed to the non-cash net settlement of a balance of $25 million of accounts receivable and payable. In the years ended December 31, 2023, 2022 and 2021, we recognized rent expense of $26 million, $11 million and $12 million, respectively, recorded in

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operating and maintenance costs, and made an aggregate cash payment of $27 million, $10 million and $15 million, respectively, to charter the rig and rent other equipment from Orion.

In the years ended December 31, 2023, 2022 and 2021, we made an aggregate cash payment of $12 million, $7 million and $6 million, respectively, to other unconsolidated affiliates for research and development and for equipment to reduce emissions and improve reliability. At December 31, 2023 and 2022, our accounts receivable from affiliates was $14 million and $32 million, respectively, recorded in other current assets, and our accounts payable to affiliates was $4 million and $2 million, respectively, recorded in accounts payable.

Acquisition—In November 2022, we and Perestroika AS (together with its subsidiaries, “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, a previously unconsolidated variable interest entity, that is constructing the ultra-deepwater floaterDeepwater Aquila. Together with a contribution from the holder of the remaining 67 percent ownership interest, these contributions were used to make the initial payment to the shipyard to acquire the newbuild drillship for a purchase price of approximately $200 million. At December 31, 2022, the aggregate carrying amount of our investment in Liquila was $15 million, recorded in other assets. On September 15, 2023, we issued 11.9 million Transocean Ltd. shares with an aggregate value of $99 million, which included 2.0 million Transocean Ltd. shares with an aggregate value of $16.4 million issued to Perestroika, to acquire the outstanding ownership interests in Liquila, and as a result, Liquila became our wholly owned subsidiary. See Note 7—Long Lived Assets and Note 14—Equity.

Debt investments—We occasionally invest in debt instruments of our unconsolidated affiliates. In June 2021, we made a cash investment of $33 million in a $100 million financing arrangement for Orion to refinance its shipyard loans. Borrowings under the financing arrangement were secured byTransocean Norge, and outstanding borrowings incurred interest at the London Interbank Offered Rate plus a margin of 6.50 percent per annum. At December 31, 2022, the aggregate carrying amount of our investment in the financing arrangement was $37 million, recorded in other assets. In September 2023, we agreed to exchange the borrowings under the financing arrangement for an additional equity investment in Orion, and Orion subsequently entered into a new credit facility with another lender. At December 31, 2023 and 2022, the aggregate principal amount due to us under the various financing arrangements with our unconsolidated affiliates was $6 million and $41 million, respectively, recorded in other assets.

Note 5—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 of our drilling contracts with customers that is satisfied over time, the duration of which varies by contract. At December 31, 2023, 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):

Major customers—For the year ended December 31, 2023, Shell plc (together with its affiliates, “Shell”), Equinor ASA (together with its affiliates, “Equinor”), TotalEnergies SE and Petróleo Brasileiro S.A. (together with its affiliates, “Petrobras”) represented approximately 27 percent,16 percent,12 percent and 11 percent, respectively, of our consolidated operating revenues. For the year ended December 31, 2022, Shell, Equinor and Petrobras 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.

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

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

Pre-operating costs—In the years ended December 31, 2023, 2022 and 2021, we recognized pre-operating costs of $69 million, $47 million and $48 million, respectively, recorded in operating and maintenance costs. At December 31, 2023 and 2022, the unrecognized pre-operating costs to obtain contracts was $221 million and $26 million, respectively, recorded in other assets, significantly increased as a result of six rigs mobilizing or preparing for contracts that commenced in the three months ended December 31, 2023, or expected to commence in the three months ending March 31, 2024.

Note 6—Contract Intangible Assets

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

We expect to recognize the remaining $4 million balance in contract drilling revenues in the three months ending March 31, 2024.

Note 7—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):

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):

In the years ended December 31, 2023, 2022 and 2021, we capitalized interest costs of $39 million, $73 million and $50 million, respectively, for our construction work in progress.

Acquisition—In September 2023, we acquired $126 million of property and equipment associated withDeepwater Aquila, an ultra-deepwater drillship under construction for Liquila, together with $7 million of cash and cash equivalents, and we assumed $19 million of accounts payable. See Note 4—Unconsolidated Affiliates and Note 14—Equity.

Disposals—During the year ended December 31, 2023, in connection with our investment in a partial ownership interest in GSR, we made a non-cash contribution of the cold-stacked ultra-deepwater floaterOcean Rig Olympia and related assets. In the year ended December 31, 2023, we recognized a loss of $169 million ($0.22 per diluted share), which hadno tax effect, associated with the disposal of the rig and related assets (see Note 4—Unconsolidated Affiliates). 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 floaterLeiv Eiriksson and related assets. In the year ended December 31, 2021, we received net cash proceeds of $4 million, and recognized an aggregate net loss of $57 million ($0.09 per diluted share), which hadno tax effect, associated with the disposal of the rig and related assets. In the years ended December 31, 2023, 2022 and 2021, we received aggregate net cash proceeds of $4 million, $7 million and $5 million, respectively and recognized an aggregate net loss of $14 million, $10 million and $5 million, respectively, associated with the disposal of assets unrelated to rig sales.

Impairment—In June 2023, we committed to the sale of the harsh environment floatersPaul B. Loyd, Jr. andTransocean Leader and related assets for expected aggregate net cash proceeds of $49 million. In the year ended December 31, 2023, we recognized an aggregate loss of $57 million ($0.07 per diluted share), which hadno tax effect, associated with the impairment of the rigs and 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 rigs 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 a binding contract for the sale of the rigs and related assets.

Assets held for sale—At December 31, 2023, the aggregate carrying amount of our assets held for sale, includingPaul B. Loyd, Jr. andTransocean Leader and related assets, was $49 million, recorded in other current assets.

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Note 8—Leases

Overview—Our operating leases are principally for office space, storage facilities, operating equipment and land. At December 31, 2023, our operating leases had a weighted-average discount rate of 6.7 percent and a weighted-average remaining lease term of 10.7 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 forone dollar. We recognize expense for the amortization of the right-of-use asset in depreciation and amortization.

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

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

At December 31, 2023, the aggregate future minimum lease payments were as follows (in millions):

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Note 9—Debt

Outstanding debt—The aggregate principal amounts and aggregate carrying amounts, including the contractual interest payments of previously restructured debt, a bifurcated compound exchange feature, and unamortized debt-related balances, such as discounts, premiums and issue costs, were as follows (in millions):

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Transocean Ltd. and Transocean Inc. are not subject to any significant restrictions on their ability to obtain funds from their consolidated subsidiaries by dividends, loans or capital distributions.

Indentures—The indentures that govern our debt generally contain covenants that, among other things, limit our ability to incur certain liens on our drilling units without equally and ratably securing the notes, to engage in certain sale and lease back transactions covering any of our drilling units, to allow our subsidiaries to incur certain additional debt, or to engage in certain merger, consolidation or reorganization transactions or to enter into a scheme of arrangement qualifying as an amalgamation.

The indentures that govern the 4.00% senior guaranteed exchangeable bonds due December 2025 (the “4.00% Senior Guaranteed Exchangeable Bonds”) and the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Senior Guaranteed Exchangeable Bonds”) require such bonds to be repurchased upon the occurrence of certain fundamental changes and events, at specified prices depending on the particular fundamental change or event, which include changes and events related to certain (i) change of control events applicable to Transocean Ltd. or Transocean Inc., (ii) the failure of our shares to be listed or quoted on a national securities exchange and (iii) specified tax matters.

The indentures that govern the 6.875% senior secured notes due February 2027, the 8.375% senior secured notes due February 2028 (the “8.375% Senior Secured Notes”) and the 8.75% senior secured notes due February 2030 (the “8.75% Senior Secured Notes”) contain covenants that limit the ability of our subsidiaries that own or operate the collateral rigs to declare or pay dividends to their affiliates.

The indentures that govern our senior secured notes contain certain lien requirements. At December 31, 2023, we had restricted cash and cash equivalents of $198 million deposited in restricted accounts to satisfy debt service and reserve requirements for the senior secured notes. At December 31, 2023, the rigs encumbered for the senior secured notes and our Shipyard Loans, includingDeepwater Aquila, which is under construction,Deepwater Atlas,Deepwater Pontus,Deepwater Poseidon,Deepwater Proteus,Deepwater Thalassa,Deepwater Titan,Transocean Enabler andTransocean Encourage, had an aggregate carrying amount of $6.13 billion. We will be required to redeem the senior secured notes at a price equal to 100 percent of the aggregate principal amount without a make-whole premium, upon the occurrence of certain events related to the respective collateral rigs and related drilling contracts.

Interest rate adjustments—At December 31, 2023, the interest rate in effect for the 7.35% senior notes due December 2041 was 9.35 percent, which is subject to adjustment from time to time upon a change to the credit rating of our non-credit enhanced senior unsecured long-term debt.

Scheduled maturities—At December 31, 2023, the scheduled maturities of our debt, including other installments of contractual interest payments for previously restructured debt, were as follows (in millions):

Credit agreements

Secured Credit Facility—As of December 31, 2023, we have a secured revolving credit facility established under a bank credit agreement (as amended from time to time, the “Secured Credit Facility”), which provides us with a borrowing capacity of $600 million through its scheduled maturity on June 22, 2025. We may borrow under the Secured Credit Facility at a forward looking term rate based on the secured overnight financing rate (“Term SOFR”) plus a margin (the “Secured Credit Facility Margin”) and a Term SOFR spread adjustment of 0.10 percent. The Secured Credit Facility is subject to permitted extensions and certain early maturity triggers, including if on any date the aggregate amount of scheduled principal repayments of indebtedness, with certain exceptions, due within 91 days thereof is equal to or in excess of $200 million and available cash is less than $250 million. The Secured Credit Facility permits us to increase the aggregate amount of commitments by up to $250 million. The Secured Credit Facility is guaranteed by Transocean Ltd. and certain wholly owned subsidiaries. The Secured Credit Facility is secured by, among other things, a lien on the ultra-deepwater floatersDeepwater Asgard,Deepwater Corcovado,Deepwater Invictus,Deepwater Mykonos,Deepwater Orion,Deepwater Skyros,Development Driller III,

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Dhirubhai Deepwater KG2 and* Discoverer Inspirationand the harsh environment floatersTransocean BarentsandTransocean Spitsbergen*, and at December 31, 2023, the aggregate carrying amount of which was $4.71 billion.

The Secured Credit Facility contains covenants that, among other things, include maintenance of a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0, a maximum debt to capitalization ratio of 0.60 to 1.00 and minimum liquidity of $500 million. The Secured Credit Facility also restricts the ability of Transocean Ltd. and certain of our subsidiaries to, among other things, merge, consolidate or otherwise make changes to the corporate structure, incur liens, incur additional indebtedness, enter into transactions with affiliates and pay dividends and other distributions. In order to utilize the Secured Credit Facility, we must, at the time of the borrowing request, be in full compliance with the terms and conditions of the Secured Credit Facility and make certain representations and warranties, including with respect to compliance with laws and solvency, to the lenders. Repayment of borrowings under the Secured Credit Facility are subject to acceleration upon the occurrence of an event of default. Under the agreements governing certain of our debt and finance lease, we are also subject to various covenants, including restrictions on creating liens, engaging in sale/leaseback transactions and engaging in certain merger, consolidation or reorganization transactions. A default under our public debt indentures, the agreements governing our senior secured notes, our finance lease contract or any other debt owed to unaffiliated entities that exceeds $125 million could trigger a default under the Secured Credit Facility and, if not waived by the lenders, could cause us to lose access to the Secured Credit Facility. At December 31, 2023, based on the credit rating of the Secured Credit Facility on that date, the Secured Credit Facility Margin was 2.875 percent and the facility fee was 0.625 percent. At December 31, 2023, we hadno borrowings outstanding, $13 million of letters of credit issued, and we had $587 million of available borrowing capacity under the Secured Credit Facility.

Shipyard financing arrangement—We have credit agreements that established the Shipyard Loans to finance all or a portion of the final payments owed to the shipyard upon delivery of the ultra-deepwater floatersDeepwater Atlas andDeepwater Titan. Borrowings under the Shipyard Loan forDeepwater Atlas are secured by, among other security, a lien on the rig, and borrowings under the Shipyard Loan forDeepwater Titan are unsecured. We have the right to prepay outstanding borrowings, in full or in part, without penalty. The Shipyard Loans contain covenants that, among other things, limit the ability of the subsidiary owners of the drilling rigs to incur certain types of additional indebtedness or make certain additional commitments or investments. In June 2022, we borrowed $349 million under the Shipyard Loan forDeepwater Atlas and made a cash payment of $46 million to satisfy the final milestone payment due upon delivery of the rig. In December 2022, we borrowed $90 million under the Shipyard Loan forDeepwater Titan and made a cash payment of $325 million to satisfy the final milestone payment due upon delivery of the rig. We recorded each Shipyard Loan, net of imputed interest, with an initial carrying amount of $300 million and $82 million, respectively, and corresponding non-cash capital additions, recorded in property and equipment. The carrying amount of each Shipyard Loan at inception represented its estimated fair value using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt, by applying an estimated discount rate of 9.4 percent and 7.6 percent, respectively.

Exchangeable bonds

Exchange terms—At December 31, 2023, the (a) current exchange rates, expressed as the number of Transocean Ltd. shares per $1,000 note, (b) implied exchange prices per Transocean Ltd. share and (c) aggregate shares, expressed in millions, issuable upon exchange of our exchangeable bonds were as follows:

The exchange rates, identified above, are subject to adjustment upon the occurrence of certain events. The 4.00% Senior Guaranteed Exchangeable Bonds may be exchanged by holders at any time prior to the close of business on the second business day immediately preceding the maturity date and, at our election, such exchange may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares. The 4.625% Senior Guaranteed Exchangeable Bonds may be exchanged by holders at any time prior to the close of business on the second business day immediately preceding the maturity date or redemption date and, at our election, such exchange may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares.

Effective interest rates and fair values—At December 31, 2023, the effective interest rates and estimated fair values of our exchangeable bonds were as follows (in millions, except effective interest rates):

We estimated the fair values of the exchangeable debt instruments, including the exchange features, by employing a binomial lattice model using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt and the expected volatility of the market price for our shares.

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Interest expense—We recognized interest expense for our exchangeable bonds as follows (in millions):

The 4.625% Senior Guaranteed Exchangeable Bonds contain a compound exchange feature that, in addition to the exchange terms outlined above, requires us to pay holders a make whole premium of future interest through March 30, 2028, for exchanges exercised during a redemption notice period. Such compound exchange feature must be bifurcated from the host debt instrument since it is not considered indexed to our stock. Accordingly, we recognize changes to the liability for the estimated fair value of the bifurcated compound exchange feature with a corresponding adjustment to interest expense. At December 31, 2023 and 2022, the carrying amount of the bifurcated compound exchange feature, recorded as a component of the carrying amount of debt, was $350 million and $295 million, respectively.

Exchanges—In April 2023, Perestroika exchanged $213 million aggregate principal amount of the 2.50% senior guaranteed exchangeable bonds due January 2027 (the “2.50% Senior Guaranteed Exchangeable Bonds”) under the terms of the governing indenture at the applicable exchange rate of 162.1626 Transocean Ltd. shares per $1,000 note. As part of the transaction governing the exchange, we delivered 34.6 million Transocean Ltd. shares and additional immaterial cash consideration to such exchanging holder. The director’s beneficial ownership of our shares resulting from these transactions did not change.

In July 2023, the holders of the remaining outstanding $25 million aggregate principal amount of 2.50% Senior Guaranteed Exchangeable Bonds exchanged such bonds under the terms of the governing indenture at the applicable exchange rate of 162.1626 Transocean Ltd. shares per $1,000 note. As part of the transaction, we delivered 4.0 million Transocean Ltd. shares.

In October 2023, holders of $60 million and $41 million aggregate principal amount of the 4.00% Senior Guaranteed Exchangeable Bonds and the 4.625% Senior Guaranteed Exchangeable Bonds, respectively, exchanged such bonds under the terms of the governing indenture at the applicable exchange rate of 190.4762 and 290.6618 Transocean Ltd. shares, respectively, per $1,000 note. As part of the transactions, we delivered an aggregate 26.5 million Transocean Ltd. shares, including an aggregate 3.1 million additional shares to such holders.

Debt issuance

**Senior secured notes—**In January 2023, we issued $525 million aggregate principal amount of 8.375% Senior Secured Notes, and we received $516 million aggregate cash proceeds, net of issue costs. The 8.375% Senior Secured Notes are secured by the assets and earnings associated with the ultra-deepwater floaterDeepwater Titan and the equity of the wholly owned subsidiary that owns or operates the collateral rig. Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements. We may redeem all or a portion of the 8.375% Senior Secured Notes on or prior to February 1, 2025 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

In January 2023, we issued $1.175 billion aggregate principal amount of 8.75% Senior Secured Notes, and we received $1.148 billion aggregate cash proceeds, net of issue costs. The 8.75% Senior Secured Notes are secured by a lien on the ultra-deepwater floatersDeepwater Pontus,Deepwater Proteus andDeepwater Thalassa and the harsh environment floatersTransocean Enabler andTransocean Encourage, together with certain related assets. Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements. We may redeem all or a portion of the 8.75% Senior Secured Notes on or prior to February 15, 2026 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

In October 2023, we issued $325 million aggregate principal amount of 8.00% senior secured notes due September 2028 (the “8.00% Senior Secured Notes”), and we received $319 million aggregate cash proceeds, net of issue costs. The 8.00% Senior Secured Notes are secured by the assets and certain earnings associated with the ultra-deepwater floaterDeepwater Aquila as well as the equity of certain of the wholly owned subsidiaries that own or operate the collateral rig. Additionally, we are required to maintain certain balances in a restricted cash account to satisfy debt service requirements. We may redeem all or a portion of the 8.00% Senior Secured Notes on or prior to September 30, 2025 at a price equal to 100 percent of the aggregate principal amount plus a make-whole premium, and subsequently, at specified redemption prices.

Senior guaranteed exchangeable bonds—In September 2022, we issued $300 million aggregate principal amount of 4.625% Senior Guaranteed Exchangeable Bonds in connection with exchange and purchase agreements. Pursuant to the exchange and purchase agreements, we exchanged (the “2022 Private Exchange”) (a) $73 million aggregate principal amount of the 0.50% exchangeable senior bonds due January 2023 (the “0.50% Exchangeable Senior Bonds”) for (i) $73 million aggregate principal amount of 4.625% Senior Guaranteed Exchangeable Bonds and (ii)6.7 million warrants to purchase Transocean Ltd. shares, and (b) $43 million aggregate principal amount of the 7.25% senior notes due November 2025 for $39 million aggregate principal amount of the 4.625% Senior Guaranteed

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Exchangeable Bonds. In the year ended December 31, 2022, as a result of the 2022 Private Exchange, we recognized a gain of $6 million ($0.01 per diluted share), with no tax effect, associated with the retirement of debt. Additionally, we sold $188 million aggregate principal amount of the 4.625% Senior Guaranteed Exchangeable Bonds and issued 15.5 million warrants to purchase Transocean Ltd. shares for aggregate net cash proceeds of $188 million. On or after March 30, 2026, we may redeem for cash all or a portion of the 4.625% Senior Guaranteed Exchangeable Bonds at a price equivalent to the aggregate principal amount to be redeemed if the closing price of our shares has been greater than 115 percent of the exchange price for a period of at least 20 trading days. The initial carrying amount of the 4.625% Senior Guaranteed Exchangeable Bonds, measured at the estimated fair value on the date of issuance, was $281 million. We estimated the fair value of the exchangeable debt instrument, including the exchange feature, by employing a binomial lattice model and by using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt and expected volatility of the market price for our shares. See Note 14—Equity.

In February 2021, we issued $294 million aggregate principal amount of the 4.00% Senior Guaranteed Exchangeable Bonds and made an aggregate cash payment of $11 million in private exchanges (the “2021 Private Exchange”) for $323 million aggregate principal amount of the 0.50% Exchangeable Senior Bonds. In the year ended December 31, 2021, as a result of the 2021 Private Exchange, we recognized a gain of $51 million ($0.08 per diluted share), with no tax effect, associated with the retirement of debt. The initial carrying amount of the 4.00% Senior Guaranteed Exchangeable Bonds, measured at the estimated fair value on the date of issuance, was $260 million. We estimated the fair value of the exchangeable debt instrument, including the exchange feature, by employing a binomial lattice model using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads of our debt and expected volatility of the market price for our shares.

Debt repayment, redemption, and retirement

Early retirement—During the three years ended December 31, 2023, we retired certain notes as a result of redemptions or private exchanges. The aggregate principal amounts, cash payments and recognized gain or loss for such transactions were as follows (in millions):

Additionally, in the year ended December 31, 2023, we recognized a net gain of $1 million associated with the retirement of $41 million aggregate principal amount of the 4.625% Senior Guaranteed Exchangeable Bonds exchanged by holders in October 2023.

Scheduled maturities and installments—On the scheduled maturity date of January 30, 2023, we made a cash payment of $49 million to repay an equivalent aggregate principal amount of the outstanding 0.50% Exchangeable Senior Bonds. On the scheduled maturity date of December 15, 2021, we made a cash payment of $38 million to repay an equivalent aggregate principal amount of the outstanding 6.375% senior notes due December 2021. In the years ended December 31, 2023, 2022 and 2021, we made an aggregate cash payment of $262 million, $479 million and $478 million, respectively, to repay other indebtedness in scheduled installments.

Note 10—Postemployment Benefit Plans

Defined contribution plans

We sponsor defined contribution plans for our employees in most markets in which we operate worldwide, the most significant of which were as follows: (1) a qualified savings plan covering certain eligible employees working in the U.S., (2) various savings plans covering eligible employees working in Norway, (3) a non-qualified savings plan covering certain eligible employees working outside the U.S., the United Kingdom (“U.K.”) and Norway and (4) a qualified savings plan covering certain eligible employees working in the U.K. In the years ended December 31, 2023, 2022 and 2021, we recognized expense of $58 million, $61 million and $52 million, respectively, recorded in the same financial statement line item as cash compensation paid to the respective employees, related to our defined contribution plans.

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Defined benefit pension and other postemployment benefit plans

Overview—As of December 31, 2023, we had defined benefit plans in the U.S., including three funded andthree unfunded defined benefit plans (the “U.S. Plans”), and in the U.K., we hadone funded defined benefit plan (the “U.K. Plan”). During the year ended December 31, 2021, as required by local authorities, we terminated our remaining plans in Norway (together with the U.K. Plan, the “Non-U.S. Plans”). We also maintain certain unfunded other postemployment benefit plans (collectively, the “OPEB Plans”), under which benefits to eligible participants diminish during a phase-out period ending December 31, 2025. We maintain the benefit obligations under our defined benefit plans until they are fully satisfied.

Net periodic benefit costs—We estimated our net periodic benefit costs using the following weighted average assumptions:

“na” means not applicable.

The components of net periodic benefit costs, recognized in other income and expense, were as follows (in millions):

Funded status—We estimated our benefit obligations using the following weighted-average assumptions:

“na” means not applicable.

The changes in funded status, balance sheet classifications and accumulated benefit obligations were as follows (in millions):

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Because our defined benefit plans no longer accrue benefits for participants, the projected benefit obligation is equivalent to the accumulated benefit obligation. Certain amounts related to plans with a projected benefit obligation and accumulated benefit obligation in excess of plan assets were as follows (in millions):

The amounts in accumulated other comprehensive loss (income) that have not been recognized were as follows (in millions):

Plan assets—The weighted-average target and actual allocations of assets for the funded defined benefit plans were as follows:

We periodically review our investment policies, plan assets and asset allocation strategies to evaluate performance relative to specified objectives. In determining our asset allocation strategies for the U.S. Plans, we review the results of regression models to assess the most appropriate target allocation for each plan, given the plan’s status, demographics and duration. For the U.K. Plan, the plan trustees establish the asset allocation strategies consistent with the regulations of the U.K. pension regulators and in consultation with financial advisors and company representatives. Investment managers for the U.S. Plans and the U.K. Plan are given established ranges within which the investments may deviate from the target allocations.

The investments for the funded defined benefit plans were categorized as follows (in millions):

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We estimated the fair values of the plan assets by applying the market approach, as categorized above, using either (i) significant observable inputs, representative of Level 1 fair value measurements, including market prices of actively traded funds, or (ii) significant other observable inputs, representative of Level 2 fair value measurements, including market prices of the underlying securities in the trust funds. The U.S. Plans and the U.K. Plan invest in passively and actively managed funds that are referenced to or benchmarked against market indices. The plan investment managers have discretion to select securities within each asset category. Given this discretion, the plans may occasionally hold either long or short positions in our debt or equity securities. Since plan investment managers are required to maintain well diversified portfolios, the actual investment in our securities would be immaterial relative to asset categories and the overall plan assets.

Funding contributions and benefit payments—In the years ended December 31, 2023, 2022 and 2021, we made an aggregate contribution of $8 million, $3 million and $10 million, respectively, to the defined benefit pension plans and the OPEB Plans using our cash flows from operations. In the year ending December 31, 2024, we expect to make an aggregate contribution of $4 million, including $1 million and $3 million to the defined benefit pension plans and the OPEB Plans, respectively.

The projected benefits payments were as follows (in millions):

Note 11—Income Taxes

Overview—Transocean Ltd., a holding company and Swiss resident, is subject to Swiss federal, cantonal and communal income tax. For Swiss income taxes, however, qualifying net dividend income and net capital gains on the sale of qualifying investments in subsidiaries are exempt from taxation. Consequently, there is not a direct relationship between our Swiss earnings before income taxes and our Swiss income tax expense.

Tax provision and rate—The components of our income tax provision (benefit) were as follows (in millions):

In the years ended December 31, 2023, 2022 and 2021, our effective tax rate was (1.4) percent, (10.4) percent and (25.7) percent, respectively, based on loss before income tax expense. The relationship between our provision for or benefit from income taxes and our income or loss before income taxes can vary significantly from period to period considering, among other factors, (a) the overall level of income before income taxes, (b) changes in the blend of income that is taxed based on gross revenues rather than income before taxes, (c) rig movements between taxing jurisdictions and (d) our rig operating structures.

A reconciliation of the income tax benefit computed at the Swiss holding company federal statutory rate of 7.83% and our reported consolidated income tax expense was as follows (in millions):

In January 2020, Switzerland made effective the Federal Act on Tax Reform and AHV Financing (“TRAF”). In March 2020, we entered into discussions with the Swiss tax authorities regarding the manner by which the TRAF applies to certain Swiss subsidiaries, which

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allows us to access historic depreciation and costs related to financing assets not previously deducted on Swiss tax returns, which can be apportioned to offset taxable income based on the remaining useful lives of the rigs and financing assets. In the three months ended December 31, 2021, we reached an agreement with the Swiss Tax authorities regarding the TRAF treatment. At December 31, 2023 and 2022, we had a deferred tax liability of $264 million and $226 million, respectively, and a deferred tax asset of $1.21 billion and $1.23 billion, respectively, offset with a valuation allowance of $1.10 billion, associated with TRAF.

Deferred taxes—The significant components of our deferred tax assets and liabilities were as follows (in millions):

We include taxes related to the earnings of all of our subsidiaries since we do not consider the earnings of any of our subsidiaries to be indefinitely reinvested.

At December 31, 2023 and 2022, our deferred tax assets included U.S. tax credits of $4 million and $11 million, respectively, which will expire between 2024 and 2026. Deferred tax assets related to our net operating losses were generated in various worldwide tax jurisdictions. At December 31, 2023, our net deferred tax assets related to our net operating loss carryforwards included $585 million, which do not expire, and $855 million, which will expire between 2024 and 2041.

As of December 31, 2023, our consolidated cumulative loss incurred over the recent three-year period represented significant objective negative evidence for the evaluation of the realizability of our deferred tax assets. Because such evidence has limited our ability to consider other subjective evidence, we evaluate each jurisdiction separately. We consider objective evidence, such as contract backlog activity, in jurisdictions in which we have profitable contracts, and the ability to carryback losses or utilize losses against potential exposures. If estimated future taxable income changes during the carryforward periods or if the cumulative loss is no longer present, we may adjust the amount of deferred tax assets that we expect to realize. At December 31, 2023 and 2022, due to uncertainty of realization, we had a valuation allowance of $1.88 billion and $1.91 billion, respectively, on net operating losses and other deferred tax assets due to the uncertainty of realization.

Unrecognized tax benefits—The changes to unrecognized tax benefits, excluding interest and penalties that we recognize as a component of income tax expense, were as follows (in millions):

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Our unrecognized tax benefits, including related interest and penalties that we recognize as a component of income tax expense, were as follows (in millions):

In the years ended December 31, 2023, 2022 and 2021, we recognized, as a component of our income tax provision, benefit of $18 million, expense of $6 million and expense of $8 million, respectively, related to interest and penalties associated with our unrecognized tax benefits. As of December 31, 2023, we have unrecognized benefits of $458 million, including interest and penalties, against which we have recorded net operating loss deferred tax assets of $411 million, resulting in net unrecognized tax benefits of $47 million, including interest and penalties, that upon reversal would favorably impact our effective tax rate. During the year ending December 31, 2024, it is reasonably possible that our existing liabilities for unrecognized tax benefits may increase or decrease, primarily due to the progression of open audits and the expiration of statutes of limitation. However, we cannot reasonably estimate a range of potential changes in our existing liabilities for unrecognized tax benefits due to various uncertainties, such as the unresolved nature of various audits.

Tax positions and returns—We conduct operations through our various subsidiaries in countries throughout the world. Each country has its own tax regimes with varying nominal rates, deductions and tax attributes that are subject to changes resulting from new legislation, interpretation or guidance. From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to adjust our recorded tax assets and liabilities. Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments. We intend to defend our tax positions vigorously. Although we can provide no assurance as to the outcome of the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our consolidated statement of financial position or results of operations; however, it could have a material adverse effect on our consolidated statement of cash flows.

Brazil tax investigations—In December 2005, the Brazilian tax authorities began issuing tax assessments with respect to our tax returns for the years 2000 through 2004. In May 2014, the Brazilian tax authorities issued an additional tax assessment for the years 2009 and 2010. We filed protests with the Brazilian tax authorities for the assessments and are engaged in the appeals process, and a portion of two cases were favorably closed. As of December 31, 2023, the remaining aggregate tax assessment, including interest and penalties, was for corporate income tax of BRL 698 million, equivalent to approximately $144 million, and indirect tax of BRL 90 million, equivalent to $19 million. We believe our returns are materially correct as filed, and we are vigorously contesting these assessments. An unfavorable outcome on these proposed assessments could have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Note 12—Loss Per Share

The computation of basic and diluted loss per share was as follows (in millions, except per share data):

We excluded from the computations certain shares issuable as follows because the effect would have been antidilutive (in millions):

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Note 13—Commitments and Contingencies

Purchase and service agreement obligations

We have purchase obligations with shipyards and other contractors primarily related to our newbuild construction program forDeepwater Aquila. We also have long-term service agreements with original equipment manufacturers to provide services and parts, primarily related to our pressure control systems and drilling systems. The commitments for our service agreements were estimated based on projected operating activity, and actual operating activity could differ from such estimates. At December 31, 2023, the aggregate future payments required under our purchase obligations and our service agreement obligations were as follows (in millions):

Letters of credit and surety bonds

At December 31, 2023 and 2022, we had outstanding letters of credit totaling $16 million and $8 million, respectively, issued under various committed and uncommitted credit lines provided by banks to guarantee various contract bidding, performance activities and customs obligations. At December 31, 2023 and 2022, we also had outstanding surety bonds totaling $198 million and $161 million, respectively, to secure customs obligations related to the importation of our rigs and certain performance and other obligations. At December 31, 2023 and 2022, the aggregate cash collateral held by institutions to secure our letters of credit and surety bonds was $7 million.

Asbestos litigation—In 2014, several of our subsidiaries were named, along with numerous other unaffiliated defendants, in complaints filed in Louisiana. The plaintiffs, former employees of some of the defendants, generally allege that the defendants used or manufactured asbestos-containing drilling mud additives for use in connection with drilling operations, claiming negligence, products liability, strict liability and claims allowed under the Jones Act and general maritime law. One of our subsidiaries has been named in similar complaints filed in Illinois, Missouri and California. At December 31, 2023, seven plaintiffs have claims pending in Louisiana and 15 plaintiffs in the aggregate have claims pending in either Illinois, Missouri, or California, in which we have or may have an interest. We intend to defend these lawsuits vigorously, although we can provide no assurance as to the outcome. We historically have maintained broad liability insurance, although we can provide no assurance as to whether insurance will cover the liabilities, if any, arising out of these claims. Based on our evaluation of the exposure to date, we do not expect the liability, if any, resulting from these claims to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

One of our subsidiaries was named as a defendant, along with numerous other companies, in lawsuits arising out of the subsidiary’s manufacture and sale of heat exchangers, and involvement in the construction and refurbishment of major industrial complexes alleging bodily injury or personal injury as a result of exposure to asbestos. As of December 31, 2023, the subsidiary was a defendant in approximately 257 lawsuits with a corresponding number of plaintiffs. For many of these lawsuits, we have not been provided sufficient information from the plaintiffs to determine whether all or some of the plaintiffs have claims against the subsidiary, the basis of any such claims, or the nature of their alleged injuries. The operating assets of the subsidiary were sold in 1989. In December 2021, the subsidiary and certain insurers agreed to a settlement of outstanding disputes that provide the subsidiary with cash. An earlier settlement, achieved in September 2018, provided the subsidiary with cash and an annuity that begins making payments in 2024. Together with a coverage-in-place agreement with certain insurers and additional coverage issued by other insurers, we believe the subsidiary has sufficient resources to respond to both the current lawsuits as well as future lawsuits of a similar nature. While we cannot predict or provide assurance as to the outcome of these matters, we do not expect the ultimate liability, if any, resulting from these claims to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Other matters—We are involved in various regulatory matters and a number of claims and lawsuits, asserted and unasserted, all of which have arisen in the ordinary course of our business. We do not expect the liability, if any, resulting from these other matters to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows. We cannot predict with certainty the outcome or effect of any of the litigation matters specifically described above or of any such other pending, threatened, or possible litigation or liability. We can provide no assurance that our beliefs or expectations as to the outcome or effect of any tax, regulatory, lawsuit or other litigation matter will prove correct and the eventual outcome of these matters could materially differ from management’s current estimates.

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Environmental matters

We have certain potential liabilities under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar state acts regulating cleanup of hazardous substances at various waste disposal sites, including those described below. CERCLA is intended to expedite the remediation of hazardous substances without regard to fault. Potentially responsible parties (“PRPs”) for each site include present and former owners and operators of, transporters to and generators of the substances at the site. It is difficult to quantify the potential cost of environmental matters and remediation obligations. Liability is strict and can be joint and several.

One of our subsidiaries was named as a PRP in connection with a site located in Santa Fe Springs, California, known as the Waste Disposal, Inc. site. We and other PRPs agreed, under a participation agreement with the U.S. Environmental Protection Agency (the “EPA”) and the U.S. Department of Justice, to settle our potential liabilities by remediating the site. The remedial action for the site was completed in 2006. Our share of the ongoing operating and maintenance costs has been insignificant, and we do not expect any additional potential liabilities to be material. Resolutions of other claims by the EPA, the involved state agency or PRPs are at various stages of investigation. Nevertheless, based on available information with respect to all environmental matters, including all related pending legal proceedings, asserted legal claims and known potential legal claims that are likely to be asserted, we do not expect the ultimate liability, if any, resulting from such matters, to have a material adverse effect on our consolidated statement of financial position, results of operations or cash flows.

Note 14—Equity

Share issuance—In September 2023, we issued 11.9 million Transocean Ltd. shares with an aggregate value of $99 million to acquire the outstanding ownership interests of Liquila (see Note 4—Unconsolidated Affiliates and Note 7—Long-Lived Assets). In the year ended December 31, 2023, we issued 65.1 million shares to certain holders that elected to exchange exchangeable bonds under terms of the governing indentures (see Note 9—Debt).

We maintain an at-the-market equity offering program (the “ATM Program”). We intend to use the net proceeds from our ongoing ATM Program for general corporate purposes, which may include, among other things, the repayment or refinancing of indebtedness and the funding of working capital, capital expenditures, investments and additional balance sheet liquidity. In June 2021, we entered into an equity distribution agreement with a sales agent for the offer and sale of our shares, with a maximum aggregate net offering price of up to $400 million, under the ATM Program. In August 2022, we entered into an equity distribution agreement with a sales agent for the offer and sale of our shares, with a maximum aggregate net offering price of up to $435 million, under the ATM Program. In the year ended December 31, 2023, we did not issue any shares under the ATM Program. In the years ended December 31, 2022 and 2021, we received aggregate cash proceeds of $263 million and $158 million, respectively, net of issue costs, for the aggregate sale of 61.0 million shares and 36.1 million shares, respectively, under the ATM Program.

Warrants—In September 2022, we issued 22.2 million warrants to purchase Transocean Ltd. shares. The warrants may be exercised by holders at any time prior to the close of business on March 13, 2026 at an exercise price equal to $3.71 per share, subject to certain anti-dilutive adjustments, and at our election, such exercise may be settled by delivering cash, Transocean Ltd. shares or a combination of cash and shares. If at any time prior to expiration, the closing price of Transocean Ltd. shares equals or exceeds $10.00 per share, subject to adjustment upon the occurrence of certain events, for a period of five consecutive trading days, we will have the right to effect an exercise of all, but not less than all, of the warrants upon notice to holders. The initial carrying amount of the warrants, recorded in additional paid-in capital and measured at the estimated fair value on the date of issuance, was $16 million, net of issue costs. We estimated the fair value of the warrants by employing a binomial lattice model and by using significant other observable inputs, representative of Level 2 fair value measurements, including the expected volatility of the market price for our shares.

Shares held by subsidiaries—One of our subsidiaries holds our shares for future use to deliver shares in connection with sales under the ATM Program and in connection with awards granted under our incentive plans or other rights to acquire our shares. At December 31, 2023 and 2022, our subsidiary held 34.7 million and 75.4 million shares, respectively.

Note 15—Share-Based Compensation

We have a long-term incentive plan (the “Long-Term Incentive Plan”) for executives, key employees and non-employee directors under which awards can be granted in the form of restricted share units, restricted shares, stock options, stock appreciation rights and cash performance awards. Awards may be granted as service awards that are earned over a defined service period or as performance awards that are earned based on the achievement of certain market factors or performance targets or a combination of market factors and performance targets. The compensation committee of our board of directors determines the terms and conditions of the awards granted under the Long-Term Incentive Plan. At December 31, 2023, we had 115.7 million shares authorized and 31.2 million shares available to be granted under the Long-Term Incentive Plan. At December 31, 2023, the total unrecognized compensation cost related to our unvested share-based awards was $42 million, which we expect to recognize over a weighted-average period of 1.72 years.

Service awards typically vest either inthree equal annual installments beginning on the first anniversary date of the grant or in an aggregate installment at the end of the stated vesting period. Service-based stock options, once fully vested, are typically exercisable during

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aseven-year period. Performance awards are typically subject to athree-year measurement period and typically vest in one aggregate installment following the ultimate determination date.

Service awards

Restricted share units—A restricted share unit subject to service requirements is a notional unit that is equal to one share but has no voting rights until the underlying share is issued. The following table summarizes unvested activity during the year ended December 31, 2023 for service-based units granted under our incentive plan:

In the year ended December 31, 2023, the service-based units that vested had an aggregate grant-date fair value of $18 million. In the years ended December 31, 2022 and 2021, we granted 6,768,943 and 6,148,361 service-based units, respectively, with a per unit weighted-average grant-date fair value of $3.60 and $3.56, respectively. In the years ended December 31, 2022 and 2021, we had 5,075,374 and 4,368,749 service-based units, respectively, that vested with an aggregate grant-date fair value of $18 million and $16 million, respectively.

Stock options—The following table summarizes activity during the year ended December 31, 2023 for vested and unvested service-based stock options outstanding under our incentive plan:

In the years ended December 31, 2022 and 2021, the stock options that vested had an aggregate grant-date fair value of $4 million and $9 million, respectively. At December 31, 2023 and 2022, there wereno outstanding unvested stock options to purchase our shares.

Performance awards

Restricted share units—A restricted share unit subject to performance requirements is a notional unit for which the awarded number of shares to be issued per unit remains uncertain until quantified as of the ultimate determination date following completion of the performance period. The following table summarizes unvested activity during the year ended December 31, 2023 for performance-based units under our incentive plan:

In the years ended December 31, 2023, 2022 and 2021, the performance-based units that vested had an aggregate grant-date fair value of $11 million, $5 million and $11 million, respectively. In the years ended December 31, 2022 and 2021, we granted 3,519,857 and 3,025,512 performance-based units, respectively, with a per unit weighted-average grant-date fair value of $3.91 and $3.70, respectively.

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Note 16—Supplemental Balance Sheet Information

Other current liabilities were comprised of the following (in millions):

Other long-term liabilities were comprised of the following (in millions):

Note 17—Supplemental Cash Flow Information

The reconciling adjustments of our net cash provided by operating activities that were attributable to the net change in other operating assets and liabilities were as follows (in millions):

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Additional cash flow information was as follows (in millions):

Note 18—Financial Instruments

Overview—The carrying amounts and fair values of our financial instruments were as follows (in millions):

Cash and cash equivalents—Our cash and cash equivalents are primarily invested in demand deposits, short-term time deposits and money market funds. The carrying amount of our cash and cash equivalents represents the historical cost, plus accrued interest, which approximates fair value because of the short maturities of the instruments.

Restricted cash and cash equivalents—Our restricted cash and cash equivalents, which are subject to restrictions due to collateral requirements, legislation, regulation or court order, are primarily invested in demand deposits and money market funds. The carrying amount of our restricted cash and cash equivalents represents the historical cost, plus accrued interest, which approximates fair value because of the short maturities of the instruments.

Long-term loans receivable from unconsolidated affiliates—The carrying amount of our long-term loans receivable from unconsolidated affiliates, recorded in other assets, represents the principal amount of the cash investment. We estimated the fair value of our long-term loans receivable from unconsolidated affiliates using significant unobservable inputs, representative of Level 3 fair value measurements, including the terms and credit spreads for the instruments.

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Total debt—The carrying amount of our total debt represents the principal amount, contractual interest payments of previously restructured debt and unamortized discounts, premiums and issue costs. The carrying amount and fair value of our total debt includes amounts related to certain exchangeable debt instruments (see Note 9—Debt). We estimated the fair value of our total debt using significant other observable inputs, representative of Level 2 fair value measurements, including the terms and credit spreads for the instruments and, with respect to the exchangeable debt instruments, the expected volatility of the market price for our shares.

Note 19—Risk Concentration

Interest rate risk—We are exposed to the interest rate risk related to our fixed-rate debt when we refinance maturing debt with new debt or when we early retire debt in open market repurchases, exchanges or other market transactions. We are also exposed to interest rate risk related to our restricted and unrestricted cash equivalents, as the interest income earned on these investments is based on variable or short-term interest rates, which change with market interest rates.

Equity price risk—We are exposed to equity price risk primarily related to the bifurcated compound exchange feature contained within the 4.625% Senior Guaranteed Exchangeable Bonds. The market price of our shares is the primary driver of the fair value of the exchange feature. An increase to the market price of our shares yields an increase to the carrying amount of the exchange feature, recorded as a component of our debt, and a corresponding increase to interest expense.

Currency exchange rate risk—We are exposed to currency exchange rate risk primarily related to contract drilling revenues, employee compensation costs and purchasing costs that are denominated in currencies other than our functional currency, the U.S. dollar. We use a variety of techniques to minimize the exposure to currency exchange rate risk, including the structuring of customer contract payment terms and occasional use of forward exchange contracts. Our primary tool to manage currency exchange rate risk involves structuring customer contracts to provide for payment in both U.S. dollars and local currency. The payment portion denominated in local currency is based on anticipated local currency requirements over the contract term. Due to various factors, including customer acceptance, local banking laws, national content requirements, other statutory requirements, local currency convertibility, local inflation and revenue efficiency, actual local currency needs may vary from those realized in the customer contracts, resulting in partial exposure to currency exchange rate risk. The currency exchange effect resulting from our international operations generally has not had a material impact on our operating results.

Credit risk—We are exposed to concentrations of credit risk primarily related to our restricted and unrestricted cash and cash equivalents and customer receivables, both current and long-term. We generally maintain our restricted and unrestricted cash and cash equivalents in time deposits at commercial banks with high credit ratings or mutual funds, which invest exclusively in high-quality money market instruments, and because we limit the amount of exposure to any one institution, we do not believe we are exposed to any significant credit risk. Our customer receivables, which are dispersed in various countries, are due from integrated energy companies, government-owned or government-controlled energy companies and other independent energy companies. For such receivables, we establish an allowance for credit losses by applying an expected loss rate based on current and forecasted future and historical experience. Although we have encountered only isolated credit concerns related to independent energy companies, we occasionally require collateral or other security to support customer receivables. In certain infrequent instances, when we determine that collection is not reasonably assured, we may offer extended payment terms and recognize revenues associated with the contract on a cash basis.

Labor agreements—At December 31, 2023, we had a global workforce of approximately 5,800 individuals, including approximately 370 contractors. Approximately 42 percent of our total workforce, working primarily in Norway and Brazil, are represented by, and some of our contracted labor work is subject to, collective bargaining agreements, substantially all of which are subject to annual salary negotiation. Negotiations over annual salary or other labor matters could result in higher personnel or other costs or increased operational restrictions or disruptions. The outcome of any such negotiation generally affects the market for all offshore employees, not only union members. A failure to reach an agreement on certain key issues could result in strikes, lockouts or other work stoppages.

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