Eugene Bang Kevin Ortiz Eric Rolston

Agenda
Company Overview Industry Deepwater Horizon Litigation Valuation Risk

Thesis
Risk averse market is overpricing risk associated with Deepwater Horizon litigation RIG will continue to generate significant and sustainable cash flows Cash flows are being returned to shareholders with an attractive dividend Attractive company at an attractive price with downside protection

Company Overview

Oil & Gas Value Chain

Upstream
Exploring for reserves Drilling of wells Operating wells for extraction

RIGs part in chain

Engineering firm designs rig

Midstream

Processing Storing Marketing Transporting

RIG contracts production of rig

Downstream

Refining Selling & distribution

Enter into leasing contracts with oil majors

Company Overview
Largest global offshore drilling contractor Leases out oil drill units for use in offshore drilling for oil and gas Clients are major oil and gas companies Based in Switzerland
1996: Acquired Transocean ASA, renamed 2000: Acquired R&B Falcon, including assets to Deepwater Horizon

1953: Started as The Offshore Company in Alabama

2008: Moved headquarters to Switzerland

1954: Launched first jackup rig in Gulf of Mexico

1996: Started building deepwater drills

2007: Merged with GlobalSa ntaFe

2010: Deepwater Horizon oil spill

Industry Terms
Dayrate: amount charged to oil and gas company to rent out the rig per day Utilization rates: the percentage of days when a contractors fleet is in use during a certain period of time Contracts:
Obtained through bidding process with competitors Charged on dayrate basis with higher rates for days rig is in operation Often leasee has option to pay termination fee or extend contract Mobilization fees

Backlog: The amount of revenue yet to be realized from existing contracts

Key for use in predicting the future cash flow to the company

Main Types of Rigs

Ultra deepwater Deepwater
Water depth: 7,500+ ft. 26 rigs Dayrate: $513,000 41% of revenues Water depth: 4,500-7,499 ft. 21 rigs Dayrate: $335,000 14% of revenues Water depth: 400-4,499 ft. 25 rigs Dayrate: $278,000 23% of revenues

Midwater

Jackups

Water depth: under 400 ft. 54 rigs Dayrate: $105,000 12% of revenues

* Dayrate - amount charged to oil and gas company to rent out the rig per day

Global Presence
5 13

2 14

3
17 11 10 29

28
3

Well diversified
Low exposure to EU Foothold in growth markets Brazil, India, Asia, W. Africa

Geographic Revenue Breakdown

Total Revenue LTM: $9.0 billion
U.S. 22%

Other Countries 43% Brazil 14%

India 9%

U.K. 12%

Revenue Efficiency
100.0% 98.0% 96.0% 94.0% 92.0% 90.0% 88.0%
Ultra Deepwater Total Fleet
Q2 2010: Deepwater Oil Spill

86.0%
84.0% 82.0% 80.0% 78.0%

Growing Backlog Since Spill

RIG ($MM)
Q309 Q110 Q210 Q310 Q111 Q211

Beginning Backlog
Revenue Ending Backlog Added Backlog

33,975
2,823 32,694

32,694
2,602 28,963

28,963
2,505 27,563

27,563
2,309 25,921

25,921
2,144 24,554

24,554
2,334 23,629

1,542

-1,129

1,105

667

777

1,409

Competitor Diamond Ensco Noble

Backlog 6,645 3,068 2,344

Revenue 3,300 2,000 2,800

Industry Overview

Competition
RIG is largest offshore drilling contractor Size and expertise allows company to charge higher rates than competitors
Company Transocean Diamond Offshore Noble Corporation ENSCO # of Rigs 138 41 Revenue ($B) 9.1 3.3 Average Dayrate $283,000 $260,000 Average Utilization Rate 70% 67%

61
72

2.8
2.0

$156,000
$133,000

79%
69%

Largest Worldwide Fleet

160 140 120 100 80 Rigs Under Construction

Ultra-Deepwater Floaters
Deepwater Floaters Midwater Floaters Jackups

60
40 20 0 RIG ESV NE DO SDRL

High Barriers to Entry

Capital intensive (costs ~$750m per UDW rig) business Limited number of shipyards with capability to build rigs 2+ year build times High level of technical expertise required to operate rigs Tight lending environment

Current Situation in Gulf Of Mexico

Gulf of Mexico is home to large number of reservoirs Since 1947, more than 50,000 wells have been drilled in GoM 64% of active leases in GoM are deepwater Operators drilled approx. 700 wells in water depths greater than 5,000 ft. Permitting in Gulf of Mexico recovered to pre-Macondo levels

Potential Industry Growth

Discovery of new offshore oil fields off coasts of Brazil and West Africa to increase demand for offshore drilling equipment Long-term rising oil prices directly benefit industry as oil and gas companies have greater incentives to increase production

Deepwater UDW

Jackup Market

Global Jackups
48 18 33 Contracted Stacked Idle Other 23 1

RIG Jackups
Contracted Stacked 36 Idle Other

255

Supply increased leading to slight overcapacity Although RIG has experienced large number of stacked rigs, jackups are not a large part of strategy going forward Market expected to improve as demand increases

Midwater Market

Global Midwater
1 14 10 Contracted Stacked Idle 62 Other 7

RIG Midwater
Contracted Stacked Idle Other

21

No wave of newbuilds Short-term contract durations increase volatility of rates Key markets: North Sea, India, S.E. Asia

Deepwater Market

Global Deepwater
10 Contracted 4 Stacked Idle 39 Other 5

RIG Deepwater
Contracted Stacked Idle 13 Other

Significant opportunities in deepwater market: India, S.E. Asia, Nigeria Dayrates have remained stable

UDW Market

Global UDW
1 12 Contracted Stacked Idle Other 85 27

RIG UDW
Contracted Stacked Idle Other

Market almost sold out in 2011 High demand has increased dayrates Key market for RIG with 41% of revenues Market share and pricing power

Deepwater Horizon Oil Spill

Drilling Process
To understand background of the spill, essential to understand drilling process

1. Operator drills exploratory wells to determine reservoir volume 2. Drilling rig moves to well 3. Rig lowers drill pipe with drill bit attached at end; bores hole into sea floor (wellbore) 4. Rig installs large pipe, casing, into wellbore to establish barrier between wellbore and surrounding formation 5. Continually adds smaller casing bonded into place by cement protects sides of wellbore from 1. pressure exerted from the drilling mud, 2. collapse of hole, 3. influx of fluids from surrounding formation

Deepwater Horizon
Deepwater Horizon: semi-submersible rig owned by RIG and operated by BP in the Gulf of Mexico (GoM) Owners of the field: BP (65%, primarily responsible for well operation), Anadarko (25%), Mitsui (10%) Parties involved:
1. 2. 3. 4. 5. RIG drilling contractor HAL cement contractor MI-SWACO drilling fluids contractor WFT float collar manufacturer CAM blowout preventer manufacturer

Role of Parties
Transocean: conducting safe operations, protecting personnel

BP: conducting operations at Macondo

Halliburton: conducting cement job, contractor to BP

Cameron: designing of Deepwater blowout preventer

Deepwater Horizon Oil Spill

Gulf of Mexico, April 20, 2010: after finishing work of the drilling of the Macondo exploratory well, an influx of hydrocarbons escalated to a blowout Hydrocarbons flowing into rig floor through a mud-gas vent ignited into two separate explosions

Thesis
Risk averse market is overpricing risk associated with Deepwater Horizon litigation RIG will continue to generate significant and sustainable cash flows Cash flows are being returned to shareholders with an attractive dividend Attractive company at an attractive price with downside protection

DOJ Litigation
December 15, 2010: Department of Justice filed a civil lawsuit against RIG and other unaffiliated defendants Complaint alleges violations under Oil Pollution Act (OPA) and Clean Water Act Asserts that defendants are liable for all removal costs and damages resulting from incident

Defense
OPA imposes strict liability on responsible parties of vessels or facilities from which oil is discharged into or upon navigable waters or adjoining shore lines Responsible party = source of discharge Owner of rig only responsible for oil on or above surface of water (Contract Article 24.1) Source of discharge in Deepwater Horizon case underwater = cannot be liable under OPA BP accepted responsible party status

BP Litigation

April 20, 2011: BP filed $40b lawsuit against RIG, HAL, Anadarko, Mitsui Claimed safety systems/devices and well control procedures failed

Defense

Indemnify legal protection against liability

Indemnity clause: any liability caused under BP cannot be used against RIG If BP were to reject indemnity responsibility, would change entire drilling industry model

Source: Transocean

BOEMRE Report
September 14, 2011: Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) released report regarding cause Panel found central cause of blowout was failure of cement barrier BPs actions prior to event increased blowout risk BP knew of safety problems and could have addressed them Lowers RIGs risk of liability in court

BOEMRE Report
In the days leading up to April 20, BP made a series of decisions that complicated cementing operations, added incremental risk, and may have contributed to the ultimate failure of the cement job.

Responsibility of RIG

Insurance Protection & Costs

RIG already claimed $560m for Deepwater Horizon Has aggregate excess liability insurance of $950m for personal injury, third party property claims, third party non-crew claims 2010: $137m in costs, $65m towards insurance deductible 2011: $135m estimated

Bottom Line
High probability of successful outcome in litigation BOEMRE report to alter position of BP Expenses to be non-material to overall bottom line Civil trial to start on February 27, 2012, successful resolution to unlock value

Thesis
Risk averse market is overpricing risk associated with Deepwater Horizon litigation RIG will continue to generate significant and sustainable cash flows Cash flows are being returned to shareholders with an attractive dividend Attractive company at an attractive price with downside protection

Rebound in Revenue Efficiency

100.0%
98.0% 96.0% 94.0% 92.0%
Q2 2010: Deepwater Oil Spill

90.0%
88.0% 86.0% 84.0% 82.0%

Ultra Deep Water

Total Fleet

80.0%
78.0%

Growing Backlog Since Spill

Q309 Beginning Backlog Revenue Ending Backlog Added Backlog 33,975 2,823

Q110 32,694 2,602

Q210 28,963 2,505

Q310 27,563 2,309

Q111 25,921 2,144

Q211 24,554 2,334

32,694
1,542

28,963
-1,129

27,563
1,105

25,921
667

24,554
777

23,629
1,409

Stable Near Term Cash Flows

Average Contracted Day Rate by Rig Type
$600
$500 $400 Thousands $300 $200 $100 $Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2010 2011 2011 2011 2011 2012 2012

High Specification Floaters

Midwater Floaters Jackups

Share Price Since Macondo

100 90

80

70

60

50

40

Implied Equity Risk Premium

CENTRAL BANKS STEP UP BATTLE TO CONTAIN CRISIS WSJ 10/7/11 DATA CANT MASK A DOUR LABOR SITUATION WSJ 10/7/11

RIG Trading Below Historical NAV

DCF Valuation
Revenue Growth 2011 8.6% -0.5% -9.2% 2012 2.1% 4.7% 5.4% 2013 -2.1% -2.3% -2.3% Price Target Budgeted Settlement Indemnity Broken 2014 0.5% -0.8% -0.8% Bear Case $44.89 $44.32 $42.62 2015 0.2% -0.6% -1.8% Base Case $77.55 $76.98 $75.28 Term. 2.3% 2.0% 1.8% Bull Case $115.57 $115.01 $113.30

Bull Case
Base Case Bear Case Macondo Scenario Budgeted Settlement Indemnity Broken

Payout $MM 200 400 1,000

Macondo penalties would have to equal $10.8b in order for the current stock price to be justified (base case)

Comps Valuation
Company EV/2011 EBITDA 6.34 5.18 9.03 10.70 9.74 8.89 EV/2012 EBITDA 4.93 5.83 5.63 6.22 5.64 5.89 EV/2013 EBITDA 4.75 5.39 5.19 5.86 5.29 5.49 EV/2011 Revenue 2.35 2.52 4.06 4.81 3.93 3.99

Transocean Diamond
Noble Ensco Plc. Rowan Companies Average (EV weighted) Implied Price (Weighted Average EV/EBITDA and Other Metrics)

$61.93 (31.9% Upside)

Potential Risks
Chance of litigation liability Government regulations
Projections show minimal effect on value
Regulations can actually help RIG Not a factor that we can control

Natural disaster

Thank You

Why RIG?
Strong cash flows being returned to investors through 6.67% dividend Stable outlook with leading market position and large contract backlog Market is overpricing Macondo litigation risk

Appendix

Appendix: What Analysts Think

Firm Morgan Stanley
JP Morgan RBC UBS Jefferies Deutsche Bank Credit Suisse Citi BofA Merrill Lynch

Rating Overweight
Hold Outperform Buy Buy Hold Neutral Buy Neutral

Price Target $108

$64 $65 $72 $80 $82 $71 $81 $67

Date Issued 9/15/11

9/26/11 9/30/11 8/15/11 8/17/11 8/4/11 8/16/11 9/16/11 9/16/11

Appendix: Barclays Capital

Overweight Rating Price Target: $74.00 (59.2% Upside) Rating issued August 22, 2011

Year

Rig Name

Rig Owner Sedco Inc Sante Fe Drilling*

Rig Operator Shell UK Amaco Trinidad Oil

Type

Damage / details

1969 Sedco 135G 1973 Mariner I

Semi-submersible Blowout damage -- off of Darwin, Australia Semi-submersible Blowout off Trinidad, 3 killed.

1979 Sedco 135F 1980 Sedco 135G

Sedco Drilling* Sedco Drilling*

PEMEX PEMEX

Semi-submersible Blowout and fire in Bay of Campeche Ixtoc I well. Semi-submersible Blowout and fire of Nigeria.

1985 West Vanguard

Smedvig

Statoil

Semi-submersible Shallow gas blowout and fire in Norwegian sea, 1 fatality.

1988 Ocean Odyssey

Diamond Offshore Drilling ARCO

Semi-submersible Gas blowout at BOP and fire in the UK North Sea, 1 killed.

1993 Actinia
2010 Deepwater Horizon

Transocean
Transocean

BP/Statoil
BP

Semi-submersible Sub-sea blowout in Vietnam.

Semi-submersible Blowout and fire on the rig, subsea well blowout, killed 11 in explosion.