Another one bites the dust. Following the explosive revelations in Jeffrey Epstein’s email files, which we covered last week, the CEO and Chairman of Dubai ports and offshore support vessel operator DP World, Sultan Ahmed bin Sulayem, has been fired by the Ruler of Dubai from both positions in the company.
In a press release on Friday, February 13, the state-owned company announced that Essa Kazim had been named as Chair of DP World’s board, and that Yuvraj Narayan its Chief Executive Officer. Following revelations that the two men had discussed a torture video together, news of Mr bin Sulayem’s departure will probably come as a relief to everyone working for DP World, and permit queasy co-investors abroad to work with the company on new infrastructure projects.
There is no evidence that the authorities in Dubai cared about the emails showing Mr bin Sulayem was discussing prostitutes and funding massage courses for young ladies studying at the American University in Dubai, but the news that Canadian pension fund La Caisse and the UK’s development finance arm British International Investment had both said last week that they could no longer work with DP World on new projects probably tipped the balance.
The 800 mainly British seafarers who were sacked and replaced them with cheaper agency workers at DP World subsidiary P&O Ferries in 2022 can savour the moment. Revenge is a dish best served cold.
The disclosures leave some difficult questions for another maritime figure, American Navy Secretary John Phelan. Mr Phelan, who acts as the US Navy’s top civilian leader, was listed on a passenger manifest list for Jeffrey Epstein’s private plane, documents in the files show, as reported by CNN.
According to the flight manifest, Mr Phelan travelled with the disgraced sex offender himself, and Mr Epstein’s close associate, Jean Luc Brunel, who was charged with rape of a minor, from London to New York in March 2006, using Mr Epstein’s private Boeing 727 jet.
From the redactions in the document, it seems that they were accompanied by several of Mr Epstein’s female victims. Like Mr Epstein, Mr Brunel hanged himself in his prison cell whilst awaiting trial for his crimes.
Of course, being mentioned in the files is not evidence of wrongdoing, flying on a sex offender’s private plane with him, his associate and pimp is something that many people have probably inadvertently done (I have not, but maybe someone you know has), and there is nothing to suggest that Mr Phelan had any knowledge of Mr Epstein’s crimes at the time, or that he was involved in the sex trafficking himself.
Of course not. But for the civilian head of the US Navy to be caught up with Mr Epstein, just as his cabinet colleague and Epstein lunch buddy Secretary of Commerce Howard Lutnick has been, does suggest an unfortunate lack of judgement, especially at a time when the White House has finally released the Maritime Action Plan, a detailed blueprint that attempts to rebuild the American shipbuilding industry and create “a new maritime golden age,” (its words, not mine). We will deal with that in a later column.
Goldman Sachs’ Chief Legal Officer and General Counsel Kathryn Ruemmler also resigned last week after details her close interactions and gift receipt from Mr Epstein were disclosed, saying that the media coverage of her emails to him were a “distraction” from doing her valuable work at the investment bank.
Note she did not say that receiving thousands of dollars of gifts from Mr Epstein was morally wrong, nor calling him “Uncle Jeffrey” was creepy, nor that seeking career advancement through his connections was a bad choice. With American naval supremacy on the line, perhaps Mr Phelan will suddenly discover that explaining his ties to the sex offender might also be a distraction.
Neither Mr Lutnick nor Mr Phelan has yet bitten the dust, unlike Mr bin Sulayem, but this week did see the biggest scalp claimed in the offshore drilling industry since the downturn of 2015.
Transocean is buying Valaris, to create a clear industry leader in deepwater, which will own and operate 33 drillships, nine semisubs and 31 jackups.
The combined fleet is larger than Noble’s and Seadrill’s. Noble operates a fleet of 31 drilling rigs, which includes 25 floaters and six jackups, but has agreed to sell one of those (Noble Resolve) in the third quarter of this year. Seadrill owns 14 floaters, of which three are long-term cold-stacked, plus one jackup in the North Sea.
Seadrill also manages an additional two drillships through its joint venture with the Angolan state oil company Sonangol.
Transocean buying Valaris is a game changer for the drilling industry.
What do you need to know about the deal?
Firstly, this is an all-stock deal. Valaris shareholders receive 15.235 shares in Transocean for each Valaris share they own. The proforma ownership of the combined entity will be ~53 per cent owned by existing Transocean shareholders and ~47 per cent Valaris stock holders.
But Transocean will be in the driver's seat. The combined entity’s CEO will be the existing Transocean CEO Keelan Adamson, the Executive Board Chair will be Transocean’s existing Chairman and former CEO Jeremy Thigpen, and the board will compose nine Transocean directors and just two of the existing Valaris directors. This is not a merger; this is a takeover.
The stock market loved the deal. Valaris stock had opened at just over US$75 per share last Monday. It closed at US$96 on Friday, and was up 78 percent on the month. Over the past year, the shares have doubled in value. Investors who bought in when the company relisted in May 2021 have seen their value quadruple.
Transocean shares closed up 52 per cent on the month, but over the period since May 2021 are around 65 per cent, and many investors who bought in 2023 and 202 have lost money, even with the recent spike. Close but no cigar, as the saying goes.
This difference in share price return goes to the heart of the deal. Since the onset of Covid in 2020, the two companies have had divergent fortunes and very different balance sheets. Valaris was quick to file Chapter 11 Bankruptcy protection when Covid struck and the oil price dipped below US$30 per barrel.
Valaris wiped away US$7.1 billion in debt when it filed for bankruptcy protection and restructured, it wrote down the value of its rigs by US$3.6 billion in 2020, and its debtholders swapped all that debt for new shares in the company. Valaris emerged back on the stock market in May 2021 owned by its creditors with zero net debt.
Transocean, on the other hand, never went into bankruptcy protection and has spent the last decade paying down debt, slogging away to reduce its debt from US$10.5 billion at the end of 2019 to just US$4.8 billion at the end of September 2025.
Last year, we described Transocean as the Lannisters of the offshore drilling industry. This is not because of incest, but because the company has always paid its debts, just like the Lannister family in the HBO drama Game of Thrones. It has not paid a dividend over this period, and it has not been able to make the stock buybacks so beloved of American listed companies.
Merging a company having high levels of debt with a company having low levels of debt enables both sets of shareholders to benefit. Transocean’s leaders said it out loud in the call with analysts about the Valaris take-over: “We know our debt level negatively impacts our equity value.”
Going forward, expect dividends and stock buybacks to feature.
By taking over Valaris, Transocean adds that company’s cash flows to its own, making it faster and lower-risk to pay down debt to more manageable levels. Approximately 80 per cent of the Valaris jackup fleet is already contracted in 2026, with around 60 per cent forward-contracted for 2027, giving Transocean access to US$1.6 billion of contract backlog at an average day rate of around US$130,000 per rig.
The deal should enable the bigger, better, and more diversified Transocean to borrow more cheaply and have easier access to capital markets to raise money, especially when refinancing its debt. As the undisputed market leader with a lower debt-to-equity ratio than before the takeover of Valaris, Transocean will benefit from a lower cost of capital compared to its smaller competitors.
Transocean had already embarked on a programme that it claimed would save US$250 million in annual costs in total last year and this year. This seemed to involve scrapping many of the drillships it had held in Greece under long-term, cold-stack lay-up. We reported in 2025 how the company was scrapping nine rigs and reporting massive write-downs, as the book value of the units in its accounts remained far above the market price, let alone the scrap price.
Now Transocean claims that the takeover of Valaris will allow it to, “consolidate overlapping global operations and shore-base[d] support, streamline operations and integrate technical expertise and eliminate redundant general and administrative expenses.”
Valaris’ CEO Anton Dibowitz and his top team won’t care; they will be rewarded handsomely for the deal and will ride off into the sunset with millions in stock options and bonuses. They have indeed done a good job for shareholders.
The pain will be borne by those lower down in the organisation, who face the uncertainty of what jobs will be eliminated and which functions will be deemed to be redundant.
Good luck to those involved. It won’t be a pleasant process, but US$200 million of savings by 2028 looks ambitious, unless the savings from scrapping laid-up rigs are included.
In 2024, Transocean reported that its whole year general and administrative expenses were US$214 million, whilst Valaris’ were US$116 million in the same period. It seems implausible that Transocean could slash the equivalent of its entire management costs from the combined business. The industry downturn from 2014 onwards has seen the drillers relentlessly squeeze fat from their overheads.
The big opportunity doesn’t come from the cost savings (which I rank at US$100 million per year at most) but from raising rig day rates. This is a deal about pushing deepwater rig rates firmly past US$500,000 per day in a market where the enlarged Transocean will own around half of the seventh- and eighth-generation rigs in the world.
You will note that this is not mentioned in the company’s joint merger presentation. Best not to say it out loud as it won’t make the customers happy.
Buying Valaris and its jackup fleet brings Transocean back into the shallow water jackup market, a segment it left in 2017 when it sold its jackup fleet to Borr Drilling for approximately US$1.35 billion, divesting ten high-specification jackups and five jackups under construction at Keppel FELS' shipyard in Singapore.
Arguably, because the jackup market is recovering, this matters less. The 15 deepwater rigs in the Valaris fleet were always the prize, not the jackups, which came as baggage. And because this is an all stock transaction, there was no other way.
Borr is too indebted to buy them and ADES is busy digesting and integrating its purchase of Shelf. Noble and Seadrill have already almost exited the shallow water segment.
In a normal world, you might expect the US Department of Justice (DOJ) to be scrutinising the anti-trust elements of the deal closely. Clearly, this takeover is about increasing day rates for deepwater rigs by reducing competition. Valaris, in particular, was seen as a player that was too willing to fix rigs too cheaply, which it could do because it had no debt to service and had savagely written down its book values so that depreciation was low.
There are 18 rigs working today in what used to be called the US sector of the Gulf of Mexico, but which President Donald Trump has renamed the Gulf of America. The new, bigger Transocean will own and operate 11 of the drillships and one jackup working there after the takeover, with a more than 66 per cent market share. In any past world, this might ring alarm bells, but I don’t see the DOJ enforcing anti-trust rules now, just as the implementation of the Foreign Corrupt Practices Act has also been suspended.
In the North Sea, Transocean operates four harsh environment semi-subs, whilst Valaris operates nine jackups, and so there is no overlap in the fleet categories that might concern the Norwegian or British competition authorities, unlike the Noble takeover of Maersk Drilling in 2022. In that case, Noble had to sell five jackup “remedy rigs” for US$375 million to Shelf Drilling.
At the end of 2020, Transocean operated a fleet of 37 deepwater rigs and Valaris a mixed fleet of 61 units. Since then, both have shrunk their fleets by relentlessly selling laid up units. Today the total of their united fleet is a quarter lower.
However, the combined fleet will still include six drillships, two semi-submersibles, and seven jackups in lay-up. Some of these units will inevitably be scrapped, but some of the upside from the deal will be reactivating them and bringing them back into service at market rates.
Transocean can do this, confident in the knowledge that the pool of rigs that can be renewed and recertified is at the lowest level since 2014, and that the acquisition of Shelf’s aging fleet of jackups by pureplay jackup owner ADES means that ADES will be actively shrinking its fleet.
Valaris recently fixed its seventh generation drillship DS-8 into a contract with Shell in Brazil at a rate around US$375,000 per day. Shell should enjoy the price, because this merger means it is unlikely to happen again.
Transocean gains control of three more Valaris seventh generation drillships, stacked in the Canary Islands, DS-13, DS-14 and DS-11. The takeover will enable Transocean to price those units more confidently.
The ARO joint venture in Saudi Arabia, which Valaris owns in conjunction with the Saudi Arabian state oil company Saudi Aramco, is embarked on the only new building rig programme in the world, slowly using shipyards in the kingdom.
This gives the company the ability of gradually undermine ADES’ dominance of the market by providing newbuilds into long-term contracts. This has always been a Transocean signature policy, which meant it had the backlog and the fixed contracts to ride out Covid in a way its competitors did not.
In 2024, it was rumoured that Transocean would buy Seadrill, then and now the smallest of the four big deepwater drillers. Both companies were then pureplay deepwater rig owners almost completely. Today, a merger between Seadrill and Noble would be logical, but might be seen as a step too far, concentrating the market from four players to just two.
My guess is that Noble or Seadrill will have a go at acquiring the Saipem fleet when the Saipem merger with Subsea 7 goes through, a deal focused purely on offshore construction and pipelay, which leaves the Saipem rig fleet looking vulnerable and not a good strategic fit with the huge offshore transport and installation contractor being created.
Saipem will exercise its option on the Deep Value Driller drillship, I believe, and Hanwha will sell its Tidal Action drillship to someone this year, whilst rig company Eldorado Drilling must surely merge with Foresight or Ventura or even Vantage.
The tail-end of the market remains heavily fragmented, and the economies of scale reaped by Transocean in the Valaris deal will make it even harder for the smaller guys to compete.
It has been nearly 20 years since Transocean agreed to buy GlobalSantaFe in a deal worth US$18 billion that combined the world’s largest offshore oil and gas drilling companies with a total order backlog of US$33 billion and a joint fleet of 146 rigs.
That deal in 2007 was also structured as an all-stock takeover by Transocean and featured an unusual debt-funded recapitalisation plan that enabled the merged company to return US$15 billion in cash to the shareholders of both companies as special dividends.
The Valaris deal will also see Transocean return funds to shareholders as soon as its debt is paid down to more moderate levels. The difference in backlog today (only US$10 billion) and fleet size (now only 73 rigs) is a reminder of how much the offshore drilling industry has shrunk over the last two decades.
The logic remains the same, however. Combine the two biggest players, juice the day rates, and cut costs. The shareholders in the new bigger Transocean want dividends and stock buybacks. Expect the management to deliver.
Background reading
Valaris’ December 2025 investor presentation highlights the strengths of the company and provides a good perspective on the wider drilling market. Valaris’ investor team has consistently provided some of the most thoughtful and detailed information on the industry, so it is disappointing to be losing their regular reports after the deal closes.
The full corporate presentation jointly issued by the two companies on the deal is here.