Transocean and Valaris announced a merger on 9 February 2026 in which Transocean will acquire Valaris in an all-stock transaction valued at approximately $5.8 billion. The pending transaction has a target close date in the second half of 2026. If finalised, it would result in a combined company with 73 offshore rigs, comprised of 33 ultra-deepwater (UDW) drillships, nine semisubmersibles and 31 jackups. The combined backlog value is approximately $10 billion.

The need for more consolidation among offshore rig contractors has been a topic of discussion for some time, as the number of rigs vying for open requirements reaches into the double-digits at times, making it difficult for rig managers to have much pricing power when it comes to their offers. These situations can also affect the duration from tender to award, as more time is needed by operators to assess all the offers fairly.

Meanwhile, consolidation among operators reduces the pool of potential clients for offshore rig contractors. A few examples from recent years include Woodside acquiring BHP, Harbour Energy acquiring both Wintershall Dea and LLOG Exploration, and Chevron acquiring Hess. Combine fewer potential clients with rig technology that has greatly reduced drilling time over the years, and too many competitors quickly add up.

Bring in the high-cost environment resulting from global inflation, and a situation has evolved in which costs such as labour, equipment and services have generally been rising, while rig dayrates have struggled to maintain upward momentum. While lower dayrates are a positive for the operators leasing the rigs, rates that are too low make it a struggle for some rig owners to survive.

Furthermore, with the expectation of ongoing supply constraints, with few new rigs entering the market in the past several years and new orders financially unfeasible for most offshore rig contractors, Transocean is positioning itself for an uptick in demand by focusing on high-specification rigs across asset types and regions. From this perspective, even the cold-stacked floaters bring meaningful value to the transaction, as some of these will be reactivation candidates when market conditions call for adding capacity.
Transocean returns to jackup world

This merger would mean the return of Transocean to the jackup market for the first time since it spun off its jackup fleet in 2017 as it transitioned to a pure deepwater play company. At the time, Borr Drilling acquired from Transocean 10 high-specification jackups and five others that were under construction.

Transocean has indicated its intent to keep the jackups, noting it sees the segment as an opportunity to add cash flow. Of the 31 jackups owned by Valaris, six are currently managed by ARO Drilling, which is a 50:50 joint venture between Valaris and Saudi Aramco. This leaves 25 jackups under the direct management of Valaris. Since Transocean does not currently manage any jackups, the ranking of the post-merger company would only result in changing the name to Transocean, which would remain tied for fourth place with Borr Drilling.

Out of the 31 owned jackups Valaris brings to the deal, 24 are marketed for work (five managed by ARO and 19 managed by Valaris). Nearly 40% of the marketed units are in the North Sea, bringing increased exposure for Transocean to this region, where it currently has four semisubs working. The next biggest region is the Middle East, which historically has had very few deepwater wells drilled, meaning Valaris also brings exposure to this region, as Transocean has no rigs in the Middle East. Notably, the Middle East fleet also brings long-term charters for most of the jackups.

Floater backlog and regional changes
Within the floating rig market, post-merger, Transocean will have the second largest semisub fleet behind China Oilfield Services Ltd. (COSL) and the largest drillship fleet, with nearly twice as many drillships as Noble Corp. The two semisubs Valaris is contributing are currently idle in the Southeast Asia region; however, as of late 4Q 2025, both were working off Australia. Valaris has indicated that both units continue to be marketed worldwide.

Meanwhile, within the drillship segment, Transocean will jump from 20 managed units to 33 post-merger. Notably, Valaris will add eight drillships in West Africa, five of which have current or future contracts. Transocean currently has one unit in the region, although it will be moving to Australia next year. The merger will add two units in the US Gulf, bringing the total to 10, and another three in Brazil, bringing the total to nine.

In terms of backlog days booked for floating rigs, Transocean has held the top spot for the past two decades. But Noble, which made multiple acquisitions over the past few years – Pacific Drilling, Maersk Drilling and Diamond Offshore – has been quickly gaining ground. Without the pending merger, Noble currently has the most backlog days secured for 2027 and 2028. Assuming the Transocean-Valaris transaction closes by the end of this year, then as backlog presently stands, Transocean reclaims the top spot for 2027, although Noble still has more backlog on the books for 2028.

As the offshore drilling market comes to the end of the mid-cycle pause during the prolonged upcycle Westwood anticipates, 2026 is expected to be a strong year for new contract awards, with most of the planned start dates being for 2027 or later, rather than 2026. As the available supply tightens, rig contractors will consider if and when to pull the trigger on reactivating their respective stacked capacities.

Fleet rationalisation
Typically, when drilling contractors merge, this can be an opportunity for fleet rationalisation, by retiring or selling off units that do not fit with the merged company’s go-forward vision. While Transocean is acquiring Valaris for its assets and accompanying cash flow, there could be some adjustments to the combined fleet, including from units currently marketed. Potential targets from the marketed fleet include the two benign Valaris semisubs mentioned earlier that are warm stacked in Southeast Asia. Neither of these is likely to be stacked long term, should new assignments not be found.

Altogether, the two companies have 13 cold stacked rigs (one of which is managed by ARO Drilling). Of the other 12, three are Transocean drillships, six are Valaris jackups and three are Valaris drillships. All six drillships are potential candidates for reactivation and are more likely to be held than retired. The jackups are less certain to make a comeback under the merged company. If they do not, they could be attractive as units to sell off at some point, rather than retire.
Is this the start of another round of consolidation?

This merger may spur others to undertake consolidation arrangements of their own, not only to be more competitive against the giant Transocean, particularly within the floating rig segment, but also to be better poised to take advantage of the market upcycle.
Source: Westwood Global Energy Group