Transocean-Valaris Merger Creates Offshore Drilling Powerhouse

Transocean Ltd. RIG and Valaris Limited VAL have announced a definitive all-stock agreement that will combine two of the offshore drilling industry’s most established players. Valued at approximately $5.8 billion, the transaction creates a pro forma enterprise with an estimated value of $17 billion, positioning the combined company as a clear global leader in offshore drilling. As part of the all-stock transaction, Valaris shareholders will receive 15.235 shares of Transocean for each Valaris common share held.

The transaction was unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2026, subject to regulatory and shareholder approvals.

Building the World’s Highest-Quality Offshore Fleet

The merger brings together highly complementary assets to form a diversified fleet of 73 rigs. This includes 33 ultra-deepwater drillships, nine semisubmersibles and 31 modern jackups. The scale and breadth of this fleet allow the combined company to operate across all water depths and offshore environments — from harsh environments to shallow-water basins — strengthening its ability to meet rising global offshore demand.

Strategic Reach Across Key Offshore Basins

By combining their geographic footprints and customer relationships, Transocean and Valaris significantly expand access to the world’s most attractive offshore basins. The transaction enhances customer optionality and positions the company to capture opportunities from an emerging multi-year offshore drilling upcycle. Along with the combined company, the global customers will also benefit from its expanded fleet of best-in-class, high-specification rigs.

Meaningful Cost Synergies & Stronger Cash Flow

Management has identified more than $200 million in incremental cost synergies, in addition to Transocean’s ongoing cost-reduction initiatives, which are expected to reduce costs by more than $250 million through 2026. These efficiencies, combined with an industry-leading backlog of approximately $10 billion, are expected to materially improve cash flow visibility, accelerate deleveraging and strengthen overall financial flexibility.

Enhanced Financial Profile & Capital Markets Presence

The combined company is expected to have a pro forma market capitalization of about $12.3 billion. Improved trading liquidity, a broader investor base and potential for increased equity index inclusion should enhance the company’s capital markets profile and long-term shareholder appeal.

Leadership Continuity & Transaction Structure

Transocean’s senior management team will continue to lead the combined entity along with two Valaris directors appointed to the board. Keelan Adamson will serve as the CEO and Jeremy Thigpen as Executive Chairman. Upon closing, Transocean, currently carrying a Zacks Rank #3 (Hold), will own approximately 53% shareholding of the combined company, while Valaris will own about 47%.

A Well-Timed Move for the Offshore Cycle

The Transocean-Valaris combination is strategically timed to capitalize on improving offshore fundamentals. With a best-in-class fleet, identified synergies and stronger balance sheet prospects, the merger creates a differentiated offshore drilling leader positioned for sustainable growth and enhanced shareholder value.

Transocean’s proposed acquisition of Valaris is attractive, as the combined entity will command a leading position in the floater market, supporting more disciplined bidding and stronger pricing power over time. The all-stock structure enhances Transocean’s balance sheet and liquidity, paving the way for shareholder returns, while expanding backlog by roughly 70% to $10 billion.

Key Picks

Investors interested in the energy sector may consider some top-ranked stocks like Archrock, Inc. AROC and Oceaneering International, Inc. OII. While Archrock sports a Zacks Rank #1 (Strong Buy) at present, Oceaneering International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock started as a broader energy services provider but has steadily refocused its business to become a premier compression services company, primarily supporting natural gas production, processing and transportation. The Zacks Consensus Estimate for AROC’s 2025 earnings indicates 52.4% year-over-year growth.

Houston, TX-based Oceaneering International is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. The Zacks Consensus Estimate for OII’s 2025 earnings indicates 76.3% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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