57 slides from Transocean Ltd (switzerland)'s proxy contest presentation, Apr 25, 2013
Slide 1: Transocean Ltd.
Transocean Ltd. April 2013 www.deepwater.com
Slide 2: Legal Disclaimer
Legal Disclaimer ‘The statements described inthis presentation that are not historical facts are forward-looking statements within the meaning of Section 2TAof the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements which could be made include, b
Slide 3: Progress, Execution, Capital Allocation, Leadership, Icahn's Agenda
lL. Progress + Improved operational and financial performance with reduction in litigation uncertainties Il, Execution + Positioned to deliver through highly capable fleet and margin improvement initiatives Ill, Balanced Capital Allocation + Sustainable dividend that supports future increases along
Slide 4: Progress
Progress www.deepwater.com
Slide 5: Progress: Operational Improvement
Progress Operational Improvement + Strong 2012 operating performance reflected in financial results Increased revenue efficiency to 93% from ~91% in 2011 Utilization up ~9% to 78% year-over-year Improved adjusted earnings per share from operations by ~160%" Cash flow from operations up ~50% to $2.7
Slide 6: Litigation Update
Progress Litigation Update Macondo Incident + Civil and criminal settlement agreements reached with Department of Justice comprising $1.4 billion paid over five years ~ Phase 1 of trial concluded 4/17/13; Parties to prepare and submit post-trial briefing over next 3 months ~ Phase 2 of trial schedul
Slide 7: Proposing an Attractive Dividend
Progress Proposing an Attractive Dividend + Operational and litigation successes permit reinstatement of dividend ~ Proposed dividend of $2.24 per share, or approximately $800 million + Robust but responsible dividend with goal of maximizing long-term value creation and, importantly, in our view est
Slide 8: Board Continues to Lead
Progress Board Continues to Lead Transocean’s Board of Directors provides strategic guidance and leadership + Encouraged the company’s focus on technological innovation and training, resulting in and sustaining Transocean’s industry leadership position + Advised management's decisions through variou
Slide 9: Execution
Execution www.deepwater.com
Slide 10: Strategic Objectives
Execution Strategic Objectives + Capitalize on industry expansion through well-positioned rig portfolio + Continue to improve operational performance ~ Revenue efficiency ~ we believe historic levels ~95% are achievable and sustainable + Technical improvements + Contractual enhancements ~ Reduce out
Slide 11: Positioned for UDW Market Demand
Execution + Robust deepwater exploration performance in 2012 provides strong pipeline for future demand ~ 28% of volume discovered in conventional ‘deepwater (1,300 ~ 5,000 feet)* ~ 49% of volume discovered in ultra-deepwater (5,000 feet)* Ullra-deepwater rig market remains tight ~ Believe Transocea
Slide 12: Building World's Highest-Quality Fleet
Execution Building World’s Highest-Quality Fleet, “STransocean ‘ACompany Built o Last + Favorably postioned to take advantage of postive industry outlook on Boliove we have worla's most capable flet of high-speciicaion eo Ta rr floaters Operates in most major markets worldwide - 510 Sgnicant relatio
Slide 13: Backlog Provides Foundation
Execution Backlog Provides Foundation Transocean’s Contract Backlog (billion) 12.0 4 10.0 8.0 60 40 38 2A 20 - i 02 d 2013 2014 2015 2016-2027 1M High-Spectcation Jackups © Midwater 1 Deepwater ‘Total Backlog from Continuing Operations - $28.5 billion ‘a ote
Slide 14: Continued Operational Improvement
Execution Continued Operational Improvement + Focus on execution and operations have led to: — Increased revenue efficiency and utilization — Captured $16.8 billion in contract backlog — Cash flow from operations up ~50% to $2.7 billion from 2011 Transocean is Delivering On Its Promise of Operationa
Slide 15: Margin Expansion Initiatives
Execution Margin Expansion Initiatives + Margin expansion initiatives separated into two key areas — Shorebased costs — organizational efficiency — Rig operating costs — execution efficiency + Initiative currently focuses primarily on organizational efficiency ~ Emphasis on delivering the most effic
Slide 16: Operational Improvements Reflected in Cash Flow Generation
Execution Operational Improvements Reflected in Cash Flow Generation STransocean + Operating cash flow started to deteriorate in 2010 as fleet utilization declined following the Macondo incident due to idling of rigs, significantly higher out-of-service days for maintenance, recertification and repa
Slide 17: Asset Strategy
Execution Asset Strategy + Grow our leadership position in high-specification assets ~ Build, acquire, divest and / or spin-off + Core, strategic asset portfolio Ultra-deepwater Harsh environment High-specification jackups High-quality floaters
Slide 18: Asset Strategy: Fleet Expansion
Execution Asset Strategy — Fleet Expansion Fleet expansion Four dynamically-positioned ultra-deepwater drillships 10-year contracts ($7.6 billion of long-dated backlog) with Shell ~$3.0 billion investment with attractive terms Net cash flow generated over the contracts of ~$4.2 billion, a simple pay
Slide 19: High-Grade Asset Transformation
Execution ; STransocean High-Grade Asset Transformation Transformative GSF Merger Maximized Exposure ..Recent Transactions Consistently Focused on to Rising Dayrates... High-Grade Transformation ayets (600) wotRier vow Post Aker Post Shalt Incuding She Wi hign spec Jocups ML Ure Deepwater ML Dsopuat
Slide 20: Asset Strategy: Divestitures
Execution Asset Strategy — Divestitures Sold 38 low-specification rig package to Shelf Drilling ~ Buyer group has deep industry experience ~ Transocean will provide support to facilitate a successful transition ~ Asignificant step forward in execution of asset strategy Divested 18 additional non-cor
Slide 21: Accelerating Portfolio Transformation
Execution Transocean's Port Accelerating Portfolio Transformation ‘folio Transformation #ofRigs 150 Key Events: + Sale of 38 low-specifcation 120 rigs to Shei + 4 newbuild contracts with Shell ot 0 29 60 16 30 2012 - Pre-Sale to Shelf Driling 2013 WH Jackups* I Midwater. ‘MH Deepwater Ultra-Deepwate
Slide 22: Balanced Capital Allocation
Balanced Capital Allocation www.deepwater.com
Slide 23: Maximizing Shareholder Value
Balanced Capital Allocation Maximizing Shareholder Value Financial Flexibility Shareholder Value Return of Capital Capital Investment
Slide 24: Financial Flexibility Drives Long-Term Value
Balanced Capital Allocation Financial Flexibility Drives Long-Term Value “STransocean + We believe financial flexibility is essential in a capital-intensive and cyclical business + Future capital requirements include: ~ Remaining litigation uncertainties + Progress made in reducing litigation exposu
Slide 25: Actions to Enhance Financial Flexibility
Balanced Capital Allocation Actions to Enhance Financial Flexibility + Continued resolution of outstanding litigation + Reinstated highly attractive, but in our view responsible, dividend ~ Allows for future increases in distributions as litigation uncertainties diminish + Prudent investment in the
Slide 26: Importance of Investment Grade Rating
Balanced Capital Allocation Importance of Investment Grade (IG) Rating “STransocean A downgrade would have real, adverse implications for Transocean: + Access —non-IG market is subject to significant market dislocation in periods of instability + More restrictive covenants for non-IG bonds + It take
Slide 27: Access and Cost of Capital
Balanced Capital Allocation Access and Cost of Capital + Continued access to low cost capital, we believe, is important in a cyclical, asset-intensive industry to preserve shareholder value + IG market is bigger and more liquid than the non-IG market + During periods of financial crises (as recently
Slide 28: Financial Flexibility: Downgrade Impact
Balanced Capital Allocation Financial Flexibility - Downgrade Impact + Although there is currently significant demand for high yield credit, over the past five years there have been periods of significant market dislocation + While the current spread between investment grade and non-investment grade
Slide 29: Detrimental Impact on Cost of Capital
Balanced Capital Allocation Detrimental Impact on Cost of Capital + Since the Icahn announcement, Transocean spreads have widened 45bps + The widening in spreads occurred following the announcement of Mr. Icahn’s stake, highlighting the credit market's concerns about his short-term focus and higher-
Slide 30: Strong Rating Agency Support For Board's Proposals
Balanced Capital Allocation Strong Rating Agency Support For Board’s Capital Allocation Proposals Moody's Commentary asi unikely that leverage largets can be achieved wth this amount of eash being diverted from debt repayment and prepayment.” - Moody's (March 13, 2013) “[The] proposal to prepay $1 b
Slide 31: Capital Investment
Balanced Capital Allocation Capital Investment + High-retum additions of new, state-of-the-art drilling rigs are, in our view, essential for the long-term competitiveness of the company ~ Represents primary source of growth and future operating income ~ Alack of investment in high-return assets woul
Slide 32: Capital Investment: Shell Newbuilds
Balanced Capital Allocation Capital Investment — Shell Newbuilds Strategic Rationale + Long-term (10-year) contracts for each of the four newbuilds + Profitable growth opportunity and asset portfolio improvement + Strategic placement of state-of-the-art unit with a major international customer + Exp
Slide 33: Board Focused on Return of Capital
Balanced Capital Allocation Board Focused on Return of Capital + Proposed dividend: ~ Represents one of the industry's highest implied payout ratios and dividend yields ~ Supported by many Transocean shareholders and members of the equity research community ~ Provides basis for increased return of c
Slide 34: Return of Capital: History of Delivering
Return of Capital — History of Delivering GlobalSantaFe Merger Share Repurchases Cumulative Dividends Proposed Dividend Total Capital Returned Balanced Capital Allocation i ie eS “STransocean ~$15 Billion* ~S4 Billion ~$1 Billion ~$0.8 Billion ~$21 Billion
Slide 35: Return of Capital: Substantial Payout
Balanced Capital Allocation Return of Capital — Substantial Payout + Transocean's recommended dividend ranks favorably when viewed as a percentage of Street consensus 2013 net income + In our opinion, payout ratios significantly higher than this level will threaten the company's operating flexibilit
Slide 36: Return of Capital: Compelling Yield
Balanced Capital Allocation Return of Capital — Compelling Yield + Transocean's dividend yield of 4.6% (based on $2.24 dividend/share) ranks favorably among other offshore drilling companies and other oilfield services sectors Indicated Dividend Yield (Average of Peer Groups) '"" sop : so} 4g | ao |
Slide 37: Analysts Agree with Our Approach
Balanced Capital Allocation Analysts Agree with Our Approach “At this point, we believe Icahn has an uphill battle heading into the shareholder vote on May 17 as we think itis would put the company at a disadvantage” — Megan Repine, FBR (4/16/13) “We think Transocean’s dividend proposal of $2.24 per
Slide 38: Corporate and Financing Structures
Balanced Capital Allocation Corporate and Financing Structures + In the interest of maximizing long-term value, the company continuously evaluates alternative corporate and financing structures with the goal of optimizing Transocean's cost of capital + Transocean has a proven track record of executi
Slide 39: Leadership
Leadership www.deepwater.com
Slide 40: Strong Corporate Governance and Board
Leadership Strong Corporate Governance and Board Example Board Renewal Performance / Action ‘Six independent directors added in last two years Diverse Board Experience Proven business leaders with a broad and deep range of Intemational leadership experience in oilfield and offshore driling services,
Slide 41: Fresh Perspectives Added to Experienced Board
Leadership Fresh Perspectives Added to Experienced and Knowledgeable Board “STransocean Board of Directors ‘Fema Vics Charman “UK ‘Sywucttrance sence ‘ReltcaPrenaert-cnevon"Stog'pamng " snnestnn ant FormerChaminand " caporaesutsonsras Teme en 7 Riana ong as Sek er age a Dieaer-ELathiweemnens : Spenc
Slide 42: Strength of Transocean Nominees
Leadership Strength of Transocean Nominees Frederico F. Curado President and CEO - Embraer Significant senior management experience operating an international corporation Indepth knowledge of Brazil, an important operating region for the company ‘Thomas W. Cason Former Senior Vice President and Chie
Slide 43: Icahn's Misguided Agenda
Icahn’s Misguided Agenda www.deepwater.com
Slide 44: Capital Allocation and Board
Icahn’s Misguided Agenda Capital Allocation and Board We firmly believe: + Icahn has failed to invest the appropriate time and analysis necessary to understand Transocean's business and industry + Icahn has focused on potential short-term gains at the expense of the company’s future and that of stak
Slide 45: Proposals Disavowed by Analysts
Icahn’s Misguided Agenda Proposals Disavowed by Analysts conlract dling sector” 2 Harry Mateer, Barclays (4/17/13) “What's galing, n our view, she unreasonable nalure of Icahn's demands, which show a.poor understanding of the offshore diiling business and threatens to derail a series of balance shee
Slide 46: Handpicked Nominees to Pursue Icahn's Misguided Agenda
Icahn’s Misguided Agenda Handpicked Nominees to Pursue Icahn’s Misguided Agenda + We believe nominees are closely tied to Icahn through current and past associations + In our view, Icahn’s Board nominees lack industry experience and are handpicked nominees to pursue Icahn’s misguided agenda Two of t
Slide 47: Handpicked Nominees to Pursue Icahn's Agenda
Misguided Agenda Icahn’s Misguided Agenda Handpicked Nominees to Pursue Icahn’s Samuel Merksamer Jose Maria Alapont + During his contentious takeover of CVR, Icahn said that Lipinski was. ~ Trying to fool shareholders ~ ACEO with a “dismat” performance and that CVR Energy was being mismanaged ~ More
Slide 48: Appendix
Appendix www.deepwater.com
Slide 49: Icahn Slate Weaknesses are Transocean Nominees' Strengths
Icahn’s Misguided Agenda Icahn Slate Weaknesses are Transocean Nominees’ Strengths “STransocean HadndiseemasCSived 2. Gi’ hy Curado Cason Newman Sprague Talber eran . © 8 8 ames ot aroma bea sate 1 0 0 0 0 CEO / CFO experience v v “4 v International exposure to key RIG markets v vw v ¥ v Financial a
Slide 50: RIG Nominee: Frederico Curado
Appendix RIG Nominee — Frederico Curado Frederico F. Curado, President and CEO - Embraer Frederico F. Curado has served as President and Chief Executive Officer of Embraer S.A. (NYSE: ER4) since 2008. Mr. Curado joined Embraer in 1984 and has served in a variety of management positions during his ca
Slide 51: RIG Nominee: Thomas Cason
Appendix RIG Nominee — Thomas Cason ‘Thomas W. Cason, Former Senior Vice President and Chief Financial Officer - Baker Hughes Thomas W. Cason has served as a director of the Company since 2007. He served as a director of GlobalSantaFe Corporation from 2001 until 2007 and of Global Marine, Inc. from
Slide 52: RIG Nominee: Steven Newman
Appendix RIG Nominee — Steven Newman Steven L. Newman, President and Chief Executive Officer - Transocean Steven L. Newman is President and Chief Executive Officer, and @ member of the Board of the Company since 2010. Before being named as Chief Executive Officer in March 2010, Mr. Newman served as
Slide 53: RIG Nominee: Robert Sprague
Appendix RIG Nominee — Robert Sprague Robert M. Sprague, Former Executive - Royal Dutch/Shell Robert M. Sprague has served as a director of the Company since 2004. Mr. Sprague is the retired Regional Business Director of Shell EP International BV, a position in which he served from 1997 until 2003.
Slide 54: RIG Nominee: J. Michael Talbert
Appendix RIG Nominee — J. Michael Talbert J. Michael Talbert, Chairman of the Board - Transocean J. Michael Talbert has served as a director of the Company since 1994. He has served as the non- ‘executive Chairman of the Board since 2011 and previously served as non-executive Vice Chaitman of the Bo
Slide 55: Comparable Companies
Appendix Comparable Companies Transocean lotshore Driers
Slide 56: Transocean Ltd.
Transocean Ltd. April 2013 www.deepwater.com
Slide 57: Footnotes
Footnotes (1) Par Fleet Stas Report issued Api 18, 2018, Floater assfcatons are by water depth as described inthe Flet Status Report. Harsh Environment Floaters ar included i the appropiate water depth cassia. Rig count associated with continuing operations is 83, lus 8 nawbulds. Rigs Under CConsinu