Shares of Transocean Ltd. (RIG) were trading lower in premarket action Friday after the offshore drilling contractor served up a classic mixed earnings report. The company missed on the bottom line but beat on the top, all while sitting on a massive backlog and working to close a game-changing merger.

For the fourth quarter of fiscal 2025, Transocean reported adjusted earnings of two cents per share. That fell short of the eight cents per share that analysts were expecting. On the brighter side, the company's quarterly revenue came in at $1.043 billion, which edged out the consensus estimate of $1.033 billion.

Drilling a bit deeper, contract drilling revenues increased by 1.5% compared to the prior quarter, helped by higher rig utilization. The company has also been busy signing new contracts. Since its last report in October 2025, Transocean added 10 new fixtures, contributing an aggregate incremental backlog of about $610 million. The weighted average day rate for those new jobs is a hefty $417,000 per day.

Not everything was smooth sailing. Operating and maintenance expense climbed to $605 million, up from $584 million in the prior quarter. The company attributed the increase to four rigs undergoing recertifications or shipyard maintenance—a necessary but costly part of keeping a fleet in top shape.

Looking at the full year 2025, the company generated $749 million in operating cash flow and $626 million in free cash flow. It ended the year with total liquidity of $1.507 billion. As of February 19, the company's total backlog stood at approximately $6.1 billion, providing a solid line of sight for future revenue.

What the CEO Had to Say

In the earnings release, CEO Keelan Adamson focused on operational and financial discipline. "At just shy of 98%, we delivered our best uptime performance on record while making significant progress in strengthening our balance sheet by retiring approximately $1.3 billion in debt principal and saving nearly $90 million in annualized interest expense," Adamson said.

He then tied the company's performance directly to its pending mega-deal. "We believe that our recently announced definitive agreement to combine with Valaris is entirely consistent with these objectives. Customers and investors alike will benefit from the expanded fleet of best-in-class, high-specification rigs and strong pro forma cash flow which improves our financial flexibility, enables accelerated debt reduction, and continued investment in our people, assets, and technologies to enhance the delivery of our services."

The Elephant in the Room: The Valaris Deal

The quarterly numbers are important, but the transformative event for Transocean is its planned acquisition of rival Valaris Ltd. (VAL). The company disclosed the deal earlier this month, valuing it at around $5.8 billion.

The merger is poised to create a significant industry player. The combined company would boast an industry-leading backlog of approximately $10 billion, dramatically enhancing cash flow visibility for the future. It's a move that aims to consolidate strength in a competitive market.

As the market digested the earnings news and looked ahead to the merger, Transocean shares were down 2.36% at $6.21 in premarket trading Friday.