Fitch Affirms & Removes Transocean from Rating Watch Negative.

CHICAGO -- Fitch Ratings has affirmed and removed Transocean, Inc.'s (Transocean) ratings from Rating Watch Negative after the company's announcement of a $4 billion share repurchase program which is expected to essentially be funded by free cash flow over the next 18 to 24 months. The Rating Outlook is Stable.

Fitch believes the $4 billion program is a prudent response to the company's sizable revenue backlog. Further, the decision to maintain current debt levels and the qualification that the program is subject to change as a result of the company securing additional newbuild opportunities are important aspects of Fitch's decision to maintain the ratings.

Fitch currently rates Transocean as follows:

-- Issuer default rating (IDR) 'A-';

-- Senior unsecured 'A-';

-- Senior unsecured bank facility 'A-'.

After hinting at a potential change in the company's financial strategy during the first-quarter earnings conference call, management and the board of directors appear to be signaling a continued commitment to the company's conservative financial strategy. While Transocean no longer appears headed toward continued debt reductions and the immediate building of a large cash balance, the company's decision to allow the revenue backlog to materialize prior to distributing free cash to shareholders is an indication of this strategy. The increased share repurchase program should also provide management with sufficient flexibility if market conditions begin to weaken or if the company is given an opportunity to build an additional newbuild.

Fitch currently expects substantially all free cash (cash from operations less capital expenditures) generated in 2006 and 2007 to be used for share repurchase activities. After adjusting the $4 billion program for the $600 million already repurchased under the $2 billion program and the $400 million expected to occur post-2007, Fitch expects the company to repurchase approximately $3 billion of stock by year-end 2007. Due to the significant number of contracts already in place during this period, Fitch believes Transocean's ability to generate $3 billion of excess cash flow (assuming no additional newbuilds are announced) is achievable and does not expect the repurchase program to result in increased borrowings.

Credit statistics for the quarter ending March 31, 2006 remain robust and continue to show signs of improving. With EBITDA of $1.2 billion generated for the latest 12 months ending March 31, 2006 and interest expense of $102.3 million, EBITDA to interest coverage stood at 11.7 times (x). Debt-to-EBITDA continued to improve and stood comfortably at 1.3x. Fitch expects Transocean to continue to show improvement in its credit metrics as new contracts are at substantially higher dayrates. By year-end 2006, interest coverage is expected to approach 18x and debt-to-EBITDA is expected to fall below 1x.

Fitch's decision to affirm the ratings and revise the Rating Outlook to Stable recognizes the significant improvement the company has made in securing a large revenue backlog (currently estimated at $17 billion), in addition to the strong market conditions for offshore drilling companies. Fitch also expects management to maintain its conservative stance with regard to the revenue backlog and rewarding equity holders as the cash flow materializes. The ratings recognize Transocean's strong market position with its fleet of 33 High-Specification floaters, and the future prospects for this sector of the market. In addition, Transocean's decision to grow and improve its asset base with minimal risks (i.e. without adding additional debt and by securing contracts for the new rigs in advance of construction) and reducing volatility in future periods via extended contracts at very competitive dayrates remain important components of the company's rating. Current ratings for Transocean remain predicated on the company not materially increasing the leverage on the balance sheet.

Transocean is the world's largest offshore drilling contractor with a fleet of 88 mobile offshore drilling units. Its mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, is considered one of the most modern and versatile in the world due to its emphasis on technically demanding sectors of the offshore drilling business. Transocean's fleet consists of 33 High-Specification floaters (semisubmersibles and drillships), 21 other floaters, 25 jackup rigs, and other assets utilized in the support of offshore drilling activities worldwide.

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