TRANSOCEAN • PROXY STATEMENT & 2003 ANNUAL REPOR TRANSOCEAN • PROXY STATEMENT www.deepwater.com 4 Greenway Plaza Houston,TX 77046 713.232.7500 T 2003PROXY STATEMENT & 2003 ANNUAL REPORT CONTENTS BOARD OF DIRECTORS CORPORATE INFORMATION Shareholders' Letter J. MICHAEL TALBERT Houston Office Chairman Transocean Inc. Notice of 2004 Annual General Meeting and Proxy Statement Transocean Inc. 4 Greenway Plaza Houston,Texas Houston,Texas 77046 713.232.7500 2003 Annual Report to Shareholders VICTOR E. GRIJALVA Chairman Internet Address: http://www.deepwater.com Supplement to Proxy Statement Hanover Compressor Company Houston,Texas ARTHUR LINDENAUER Transfer Agent and Registrar ABOUT TRANSOCEAN INC. Retired Executive Vice President-Finance and Chief Financial Officer The Bank of New York Schlumberger Limited P.O. Box 11258 New York, New York Church Street Station We are the world's largest offshore drilling contractor with full or partial ownership in 96 mobile offshore drilling units, excluding the New York,New York 10286 ROBERT L. LONG 1.877.397.7229 70-rig fleet of TODCO, a publicly traded drilling company in which we own a majority interest. Our mobile offshore drilling fleet is President and Chief Executive Officer considered one of the most modern and versatile in the world due to our emphasis on technically demanding segments of the off- Transocean Inc. Internet Address: http://www.stockbny.com shore drilling business, including industry-leading positions in high-specification deepwater and harsh environment drilling units. We Houston,Texas E-mail Address: [email protected] have more than 10,000 employees worldwide. PAUL B. LOYD, JR. Former Chairman R&B Falcon Corporation Since launching the offshore drilling industry's first jackup drilling rig in 1954, we have achieved a long history of technological "firsts." Houston,Texas These innovations include the first dynamically positioned drillship, the first rig to drill year-round in the North Sea, the first semisub- Direct Purchase Plan mersible for sub-Arctic, year-round operations and the latest generation of ultra-deepwater semisubmersible rigs and drillships. MARTIN B. MCNAMARA The Bank of New York,the Transfer Agent for Transocean Inc., offers a Direct Purchase and Sale Plan Partner-In-Charge for the ordinary shares of Transocean Inc. called BuyDirect. For more information on the Plan, includ- Gibson, Dunn & Crutcher, LLP ing a complete enrollment package, please contact The Bank of New York at 1.877.397.7229. With an equity market capitalization in excess of $9 billion at February 27, 2004, which is the largest in the offshore drilling industry, Dallas,Texas the company's ordinary shares are traded on the New York Stock Exchange under the symbol "RIG." ROBERTO L. MONTI Auditors Retired Executive Vice President Transocean:We're never out of our depth® Exploration and Production Ernst & Young LLP Repsol YPF Houston,Texas Buenos Aires,Argentina TRANSOCEAN WORLDWIDE OPERATIONS RICHARD A. PATTAROZZI Stock Exchange Listing Retired Shell Oil Company Executive Transocean Inc. ordinary shares are listed on the New York Stock Exchange (NYSE) under the symbol Metairie, Louisiana RIG.The following table sets forth the high and low sales prices of the company’s ordinary shares for the periods indicated, as reported on the NYSE Composite Tape. KRISTIAN SIEM Norway Chairman and Chief Executive Officer 2 Siem Industries Inc. Price (in U.S. dollars) HIGH LOW 2 George Town, Cayman Islands 2002 IAN C. STRACHAN First Quarter 34.66 26.51 Chairman Second Quarter 39.33 30.00 Instinet Group Incorporated Third Quarter 31.75 19.60 UK New York, New York Fourth Quarter 25.89 18.10 2 1 2003 E. Canada 10 Caspian 1 First Quarter 24.36 19.87 Italy EXECUTIVE OFFICERS 1 Second Quarter 25.90 18.40 2 Third Quarter 22.43 18.50 Canary Islands J. MICHAEL TALBERT Fourth Quarter 24.85 18.49 1 Egypt Chairman US Gulf of Mexico UAE 5 3 1 1 3 1 SE Asia ROBERT L. LONG Financial Information 1 3 1 President and Chief Executive Officer 3 6 1 2 Financial analysts and shareholders desiring information about Transocean Inc. should write to the Investor Relations and Corporate Communications Department or call 713.232.7694. Information India JEAN P. C AHUZAC West Africa may also be obtained by visiting the company’s website at http://www.deepwater.com. 8 2 Executive Vice President and Chief Operating Officer 1 1 4 2 5 3 2 ERIC B. BROWN Australia Brazil Senior Vice President, General Counsel and Corporate Secretary 2 2 1 GREGORY L. CAUTHEN 2 2 Senior Vice President and Chief Financial Officer 2 TIM L. JURAN Vice President, Human Resources BARBARA S. KOUCOUTHAKIS Vice President and Chief Information Officer 5th Generation Deepwater Drillships Other Deepwater1 Drillships Other High Specification Semisubmersibles Other Semisubmersibles Inland Barges JAN RASK 5th Generation Deepwater Semisubmersibles Other Deepwater Semisubmersibles Other Drillships Jackups Tenders President and Chief Executive Officer,TODCO As of February 27, 2004. Excludes our platform drilling unit, mobile offshore production unit, land rig and coring drillship and the 70-rig fleet of TODCO, a publicly traded drilling company in which we own a majority interest. For a complete listing of our fleet, see pages A-6 to A-9. About the Cover: The Discoverer Deep Seas, for the first time in the offshore drilling industry's history, drilled in more than 10,000 feet of water, setting a new world water-depth drilling record at 10,011 feet of water in November 2003 for ChevronTexaco in the U.S.Gulf of Mexico. The Discoverer Deep Seas is one of 32 high-specification drillships and semisubmersibles in Transocean's fleet,28 of which form the world's largest deepwater drilling rig fleet capable of working in more than 4,500 feet of water. Forward-Looking Statements: Any statements included in this Proxy Statement and 2003 Annual Report that are not historical facts, including without limitation statements regarding future results and operations, are forward-looking statements within the meaning of applicable securities laws. Such statements are subject to numerous risks and uncertainties (including, but not limited to, those that can be found on pages A-46 to A-50 of this Proxy Statement and 2003 Annual Report) that could cause actual results to differ materially from those projected. To Our Shareholders, Before the year commenced, 2003 was understood to be potentially difficult for our business. With the United States poised to disarm the Iraqi leadership, crude oil prices began the year averaging more then $30 per barrel. In addition, U.S. economic performance was inconsistent and world economic growth potential was in question, leading to an anticipated flat spending scenario from our customer base. We also entered 2003 with an over- supply of certain types of offshore drilling rigs, specifically deepwater and conventional semisubmersibles and drillships. As the year progressed, this uninspiring demand scenario indeed played out. Despite a year with crude oil and U.S. natural gas prices averaging their highest levels in five years, at $30.99 per barrel and $5.19 a unit, respectively, exploration and production spending by our customers remained subdued. This trend, together with the oversupply of certain classes of drilling rigs, contributed to our poor financial performance in 2003, as our fleet utilization, revenues and net income declined relative to 2002 levels. For the twelve months ended December 31, 2003, the company reported net income of $19.2 million, or $0.06 per diluted share, on revenues of $2,434.3 million. The 2003 reported net income compared to a net loss for 2002 of $3,731.9 million, or $11.69 per diluted share, on revenues of $2,673.9 million. Excluding the after- tax impact of $17.4 million in restructuring charges pertaining to our operations in Nigeria, costs of $8.8 mil- lion relating to the initial public offering (IPO) of TODCO, our Gulf of Mexico Shallow and Inland Water busi- ness segment, which was operated as a wholly owned subsidiary, asset impairment charges of $26.4 million, early debt-retirement losses of $13.8 million and a $14.6 million favorable resolution of a non-U.S. income tax liability, net income in 2003 was $71.0 million, or $0.22 per diluted share. The 2003 operating results compared to net income during the twelve months of 2002 (before the impact of non-cash charges relating to goodwill and asset impairments of $4,239.7 million and $33.5 million, respectively, and a tax benefit of $175.7 million) of $365.6 million, or $1.15 per diluted share. During 2003, our mobile offshore drilling fleet experienced a reduction in fleet utilization to 57% from 59% in 2002, while the average dayrate for the fleet declined to $67,200 in 2003 from $74,800 in 2002. Our 32-rig High Specification Floater fleet, which includes 28 rigs capable of operating in water depths of 4,500 feet and greater, accounted for 54% of the company’s revenues in 2003. The average utilization and dayrate for this segment of our fleet declined to 80% and $143,000, respec- tively, in 2003 from 86% and $146,100, respectively, in 2002. Despite the reduced level of profitability in 2003, we maintained a strong level of cash flow from operations, totaling $525.8 million. While our 2003 financial performance was disappointing, we remained focused throughout the year on several initiatives that should improve future profitability through lower personnel and maintenance costs. During 2003, we continued our focus on hiring and training citizens of the countries in which we operate and have successfully reduced our reliance on expatriate personnel. This initiative has not only reduced costs, but has also provided the benefit of improving our standing in the countries in which we operate and supported our relationship with national oil companies.