Fitch Ratings Affirms Transocean Unsecured Senior Debt at 'BBB+'.

CHICAGO -- Fitch Ratings has affirmed the 'BBB+' senior unsecured debt rating of Transocean, Inc. (Transocean). The commercial paper rating of 'F2' has been withdrawn as the company terminated its commercial paper program earlier this year. The Rating Outlook is Stable.

The rating is based on Transocean's strong offshore drilling fleet, its ability to consistently generate positive free cash flow, and management's willingness to reduce debt. Transocean has the largest number of 'floating' rigs in the industry with 57 semisubmersibles and drillships. It is the clear leader in the deepwater drilling segment with approximately 50% of the industry's vessels capable of drilling in at least 7,000 feet of water. It also has 26 international jackups and 11 other international drilling rigs. The company also has an interest in TODCO, the shallow-water contract driller. Transocean maintains 47% of TODCO common stock and 82% of the combined voting power of the outstanding common stock.

In the latest 12 months (LTM) Transocean has generated approximately $55 million of positive free cash flow. This figure is artificially low as it includes Transocean's acquisition of two fifth-generation deepwater rigs, the Deepwater Pathfinder and Deepwater Frontier, through the payoff of synthetic lease financing arrangements totaling $383 million. Excluding the acquisition of the two semisubmersibles, free cash flow exceeds $435 million, a figure more in line with the past several years. In addition to significant cash flow from operations, Transocean completed the TODCO IPO in January 2004 and a secondary offering of TODCO in September 2004. The two offerings resulted in net proceeds to Transocean of about $425 million.

Equally important has been management's willingness to reduce debt. In the first nine months of 2004, Transocean used free cash flow, proceeds from assets sales and cash on hand to reduce debt by $597 million to $3.1 billion. Additionally, since the end of the third quarter, Transocean completed the $342 million redemption of its 6.75% notes due 2005 and announced it was tendering for any and all of its $200 million 8% debentures due 2027.

Despite the progress made at reducing debt, Transocean's coverage ratios remain modest. EBITDA during the latest 12 months (LTM) of approximately $811 million provided adjusted interest coverage of 3.7 times (x) and adjusted debt to EBITDA of 4x. Fitch expects Transocean's credit profile to improve significantly in 2005 as the company benefits from a better operating environment, lower interest payments, less debt and a conservative capital program.