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Transocean Inc. Reports First Quarter 2008 Financial Results

May 7, 2008

HOUSTON--(BUSINESS WIRE)--May 7, 2008--Transocean Inc. (NYSE:RIG) today reported net income for the three months ended March 31, 2008 of $1,189 million, or $3.71 per diluted share, compared to net income of $553 million, or $2.62 per diluted share for the three months ended March 31, 2007. Revenues for the first quarter of 2008 were $3,110 million compared to $1,328 million for the first quarter of 2007.

On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation (the "Merger") and reclassified its ordinary shares into cash and shares (the "Reclassification"). Reported results for the first quarter of 2008 include a full three months from GlobalSantaFe's operations. Diluted earnings per share for the first quarter of 2007 excludes GlobalSantaFe's operations and is based on a weighted average diluted share count of 212 million shares, which includes the effect of restating the historical diluted share count for the Reclassification. Results for the fourth quarter of 2007 include approximately one month of GlobalSantaFe's operations.

First quarter 2008 results included after-tax charges of $30 million, or $0.09 per diluted share, related to $27 million for discrete tax items, $1 million for Merger-related costs and a $2 million loss resulting from the retirement of debt. Net income for the quarter ended March 31, 2007 included after-tax gains of $22 million, or $0.10 per diluted share, resulting from the sale of a tender-assist rig and a tax benefit on discrete items.

Operations Quarterly Review

Revenues for the three months ended March 31, 2008 increased 49.7 percent to $3,110 million compared to revenues of $2,077 million during the three months ended December 31, 2007. Of the $1,033 million quarter-to-quarter increase, $919 million reflected the addition of a full quarter of GlobalSantaFe revenues, including an increase of $136 million in non-cash contract intangible revenue. The remaining increase was primarily due to a higher average dayrate for the Transocean fleet as well as a decrease in shipyards and maintenance time. The increase in average dayrate was experienced across all rig categories, primarily as a result of rigs commencing new contracts at the higher prevailing current dayrates. First quarter of 2008 results benefited from the postponement of several shipyard projects to later in the year.

Operating and maintenance expenses for the three months ended March 31, 2008 were $1,157 million compared to $923 million for the prior three-month period, an increase of $234 million or 25.4 percent. The addition of GlobalSantaFe's operations accounted for an increase of $332 million, which was partially offset by a decrease in costs for shipyards and major maintenance projects. Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year.

Depreciation, depletion and amortization increased to $367 million in the first quarter of 2008, an increase of 88.2 percent compared to $195 million in the fourth quarter of 2007. Property and equipment and certain intangible assets acquired in the Merger accounted for the majority of this increase.

General and administrative expenses decreased 18.3 percent to $49 million in the first quarter of 2008 compared to $60 million in the prior three-month period. The decrease primarily reflects a reduction in Merger-related compensation costs compared to the fourth quarter of 2007.

Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the first quarter of 2008 increased to $137 million compared to $79 million for the fourth quarter of 2007. The increase primarily resulted from interest on the borrowings incurred in conjunction with the Merger and Reclassification.

Cash flow from operating activities totaled $1,482 million for the first quarter of 2008 compared to $915 million for the fourth quarter of 2007. As of March 31, 2008, total debt was $16.6 billion, down $0.7 billion from $17.3 billion as of December 31, 2007.

Effective Tax Rate

The reported Effective Tax Rate(1) of 15.5 percent for the first quarter of 2008 reflects the unfavorable impact of various discrete tax items of $27 million resulting from changes in estimates. Excluding these various discrete tax items, the Annual Effective Tax Rate(2) for the first quarter of 2008 was 13.5 percent.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern Time on May 7, 2008. To participate, dial 913-312-0968 and refer to confirmation code 9574214 approximately five to 10 minutes prior to the scheduled start time of the call.

In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto the company's website at www.deepwater.com and selecting "Investor Relations/News & Events/Webcasts & Presentations." A file containing four charts to be discussed during the conference call, titled "1Q08 Charts," has been posted to the company's website and can also be found by selecting "Investor Relations/News & Events/Webcasts & Presentations." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company's New York Stock Exchange trading symbol, "RIG."

A telephonic replay of the conference call should be available after 1:00 p.m. Eastern Time on May 7, 2008 and can be accessed by dialing 719-457-0820 and referring to the passcode 9574214. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.

Transocean Inc. is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 138 mobile offshore drilling units plus nine announced ultra-deepwater newbuild units, the company's fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. The company owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 29 Midwater Floaters, 10 High-Specification Jackups, 56 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

(1) Effective Tax Rate is defined as income tax expense divided by
     income before income taxes. See the accompanying schedule
     entitled "Supplemental Effective Tax Rate Analysis."
(2) Annual Effective Tax Rate is defined as income tax expense
     excluding various discrete items (such as changes in estimates
     and tax on items excluded from income before income taxes)
     divided by income before income taxes excluding gains on sales
     and similar items pursuant to Financial Accounting Standards
     Board Interpretation No. 18. See the accompanying schedule
     entitled "Supplemental Effective Tax Rate Analysis."
                   TRANSOCEAN INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In millions, except per share data)
                             (Unaudited)

                                          Three months ended March 31,
                                          ----------------------------
                                              2008           2007
                                          -------------  -------------
Operating revenues
  Contract drilling revenues                 $   2,640      $   1,273
  Contract intangible revenues                     224             --
  Other revenues                                   246             55
----------------------------------------------------------------------
                                                 3,110          1,328
----------------------------------------------------------------------
Costs and expenses
  Operating and maintenance                      1,157            568
  Depreciation, depletion and
   amortization                                    367            100
  General and administrative                        49             26
----------------------------------------------------------------------
                                                 1,573            694
----------------------------------------------------------------------
Gain from disposal of assets, net                    3             23
----------------------------------------------------------------------
Operating income                                 1,540            657
----------------------------------------------------------------------

Other income (expense), net
  Interest income                                   13              5
  Interest expense, net of amounts
   capitalized                                    (137)           (37)
  Other, net                                        (8)            13
----------------------------------------------------------------------
                                                  (132)           (19)
----------------------------------------------------------------------

Income before income taxes and minority
 interest                                        1,408            638
Income tax expense                                 218             85
Minority interest                                    1             --
----------------------------------------------------------------------

Net income                                   $   1,189      $     553
======================================================================

Earnings per share
   Basic                                     $    3.75      $    2.72
   Diluted                                   $    3.71      $    2.62
======================================================================

Weighted average shares outstanding
   Basic                                           317            203
   Diluted                                         321            212
======================================================================
                   TRANSOCEAN INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS
                   (In millions, except share data)

                                             March 31,   December 31,
                                               2008          2007
                                           ------------- -------------
                                            (Unaudited)
                  ASSETS
Cash and cash equivalents                    $    1,567    $    1,241

Accounts receivable, net of allowance for
 doubtful accounts of $61 and $50 at March
 31, 2008 and December 31, 2007,
 respectively                                     2,357         2,370
Materials and supplies, net of allowance
 for obsolescence of $20 and $22 at March
 31, 2008 and December 31, 2007,
 respectively                                       367           333
Deferred income taxes, net                           96           119
Assets held for sale                                666            --
Other current assets                                177           233
----------------------------------------------------------------------
   Total current assets                           5,230         4,296
----------------------------------------------------------------------

Property and equipment                           24,237        24,545
Less accumulated depreciation                     3,949         3,615
----------------------------------------------------------------------
   Property and equipment, net                   20,288        20,930
----------------------------------------------------------------------
Goodwill                                          8,424         8,219
Other assets                                        920           919
----------------------------------------------------------------------
   Total assets                              $   34,862    $   34,364
======================================================================

   LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                             $      722    $      805
Accrued income taxes                                238            99
Debt due within one year                          3,356         6,172
Other current liabilities                           772           826
----------------------------------------------------------------------
   Total current liabilities                      5,088         7,902
----------------------------------------------------------------------

Long-term debt                                   13,239        11,085
Deferred income taxes, net                          814           681
Other long-term liabilities                       1,928         2,125
----------------------------------------------------------------------
   Total long-term liabilities                   15,981        13,891
----------------------------------------------------------------------

Commitments and contingencies

Minority interest                                     6             5

Preference shares, $0.10 par value;
 50,000,000 shares authorized, none issued
 and outstanding                                     --            --
Ordinary Shares, $0.01 par value;
 800,000,000 shares authorized,
 318,217,122 and 317,222,909 shares issued
 and outstanding at March 31, 2008 and
 December 31, 2007, respectively                      3             3
Additional paid-in capital                       10,853        10,799
Accumulated other comprehensive loss                (64)          (42)
Retained earnings                                 2,995         1,806
----------------------------------------------------------------------
   Total shareholders' equity                    13,787        12,566
----------------------------------------------------------------------
   Total liabilities and shareholders'
    equity                                   $   34,862    $   34,364
======================================================================
                   TRANSOCEAN INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (In millions)
                             (Unaudited)

                                         Three months ended March 31,
                                         -----------------------------
                                              2008           2007
                                         --------------  -------------
Cash flows from operating activities
  Net income                               $     1,189     $      553
  Adjustments to reconcile net income to
   net cash provided by operating
   activities
    Amortization of drilling contract
     intangibles                                  (224)            --
    Depreciation, depletion and
     amortization                                  367            100
    Share-based compensation expense                22             10
    Gain from disposal of assets, net               (3)           (23)
    Deferred revenue, net                           18             34
    Deferred expenses, net                          16             (7)
    Deferred income taxes                          (25)            (2)
    Other, net                                     (12)            (1)
    Changes in operating assets and
     liabilities                                   134            (10)
----------------------------------------------------------------------
Net cash provided by operating
 activities                                      1,482            654
----------------------------------------------------------------------

Cash flows from investing activities
  Capital expenditures                            (769)          (465)
  Proceeds from disposal of assets, net            254             39
  Joint ventures and other investments,
   net                                              (3)            (3)
----------------------------------------------------------------------
Net cash used in investing activities             (518)          (429)
----------------------------------------------------------------------

Cash flows from financing activities
  Borrowings under commercial paper
   program, net                                  1,316             --
  Borrowings under Five-Year Revolving
   Credit Facility                                 180             --
  Repayments under 364-Day Revolving
   Credit Facility                              (1,500)            --
  Proceeds from debt                             1,976            190
  Repayments of debt                            (2,633)            --
  Financing costs                                   (3)            --
  Payments made upon exercise of
   warrants, net                                    (4)            --
  Proceeds from issuance of ordinary
   shares under share-based compensation
   plans, net                                       27             15
  Repurchase of ordinary shares                     --           (400)
  Other, net                                         3              5
----------------------------------------------------------------------
Net cash used in financing activities             (638)          (190)
----------------------------------------------------------------------

Net increase in cash and cash
 equivalents                                       326             35
Cash and cash equivalents at beginning
 of period                                       1,241            467
----------------------------------------------------------------------
Cash and cash equivalents at end of
 period                                    $     1,567     $      502
======================================================================
                           Transocean Inc.
                      Fleet Operating Statistics

                                  Operating Revenues ($ Millions) (1)
                                 -------------------------------------
                                          Three months ended
                                 -------------------------------------
                                  March 31,   December 31,  March 31,
                                     2008         2007        2007
                                 ------------ ------------ -----------
Contract Drilling Revenues
  High-Specification Floaters:
    Ultra Deepwater Floaters       $     608    $     453    $    340
    Deepwater Floaters                   325          290         260
    Harsh Environment Floaters           150          120          85
  Total High-Specification
   Floaters                            1,083          863         685
  Midwater Floaters                      675          534         379
  High-Specification Jackups             157           64          12
  Standard Jackups                       711          386         182
  Other Rigs                              14           13          15
Subtotal                               2,640        1,860       1,273
Contract Intangible Revenue              224           88           0
Other Revenues
  Client Reimbursable Revenues            47           32          30
  Integrated Services and Other           36           52          25
  Drilling Management Services           139           36           0
  Oil and Gas Properties                  24            9           0
Subtotal                                 246          129          55
Total Company                      $   3,110    $   2,077    $  1,328

                                         Average Dayrates (1)
                                          Three months ended
                                 -------------------------------------
                                  March 31,   December 31,  March 31,
                                     2008         2007        2007
                                 ------------ ------------ -----------
  High-Specification Floaters:
    Ultra Deepwater Floaters       $ 380,800    $ 346,100    $301,400
    Deepwater Floaters             $ 284,100    $ 265,300    $235,800
    Harsh Environment Floaters     $ 344,000    $ 326,300    $238,800
  Total High-Specification
   Floaters                        $ 340,900    $ 311,600    $264,800
  Midwater Floaters                $ 292,300    $ 274,600    $223,700
  High-Specification Jackups       $ 173,800    $ 173,400    $133,400
  Standard Jackups                 $ 146,200    $ 130,800    $103,200
  Other Rigs                       $  49,700    $  48,600    $ 50,300
Total Drilling Fleet               $ 229,000    $ 224,000    $198,000

                                            Utilization (1)
                                 -------------------------------------
                                          Three Months Ended
                                 -------------------------------------
                                  March 31,   December 31,  March 31,
                                     2008         2007        2007
                                 ------------ ------------ -----------
  High-Specification Floaters:
    Ultra Deepwater Floaters              98%          97%         97%
    Deepwater Floaters                    79%          75%         77%
    Harsh Environment Floaters            96%          80%         99%
  Total High-Specification
   Floaters                               90%          85%         87%
  Midwater Floaters                       88%          95%         94%
  High-Specification Jackups              99%         100%        100%
  Standard Jackups                        93%          91%         82%
  Other Rigs                             100%          97%        100%
Total Drilling Fleet                      91%          90%         88%
(1) Average daily revenue is defined as contract drilling revenue
     earned per revenue earning day in the period. A revenue earning
     day is defined as a day for which a rig earns dayrate after
     commencement of operations. Utilization is defined as the total
     actual number of revenue earning days in the period as a
     percentage of the total number of calendar days in the period for
     all drilling rigs in our fleet.
                   Transocean Inc. and Subsidiaries
           Non-GAAP Financial Measures and Reconciliations

      Operating Income Before General and Administrative Expense
                      to Field Operating Income
                            (in millions)

                                                 Three months ended
                                               -----------------------
                                               Mar 31, Dec 31, Mar 31,
                                                2008    2007    2007
                                               ------- ------- -------

  Operating revenue                            $3,110  $2,077  $1,328
  Operating and maintenance expense             1,157     923     568
  Depreciation, depletion and amortization        367     195     100
  (Gain) loss from disposal of assets, net         (3)   (254)    (23)
                                               ------- ------- -------
Operating income before general and
 administrative expense                         1,589   1,213     683
Add back (subtract): Depreciation, depletion
                      and amortization            367     195     100
                     (Gain) loss from disposal
                      of assets, net               (3)   (254)    (23)
                                               ------- ------- -------
Field operating income                         $1,953  $1,154  $  760
                                               ------- ------- -------
                   Transocean Inc. and Subsidiaries
               Supplemental Effective Tax Rate Analysis
                            (In millions)

                             Three months ended   Years ended Dec. 31,
                           ---------------------- --------------------
                           March    Dec.   March
                             31,     31,     31,
                            2008    2007    2007      2007      2006
                           ------- -------------- ------------ -------
Income (Loss) before
 income taxes and minority
 interest                  $1,408  $1,079  $ 638       $3,384  $1,607
  Add back (subtract):
    (Gain) loss on
     disposal of assets,
     net                        -    (233)   (23)        (264)   (410)
    Income from TODCO tax
     sharing agreement          -      (1)     -         (277)    (51)
    (Gain) loss on
     retirement of debt         2       8      -            8       -
    GSF Merger related
     costs                      1      82      -           82       -
                           -------------------------------------------

Adjusted income before
 income taxes               1,411     935    615        2,933   1,146

Income tax expense            218      23     85          253     222
  Add back (subtract):
    (Gain) loss on
     disposal of assets,
     net                        -       -     (3)          (3)    (24)
    GSF Merger related
     costs                      -      15      -           15       -
    Changes in estimates
     (1)                      (27)     36      2          101      14
                           -------------------------------------------
Adjusted income tax
 expense (2)               $  191  $   74  $  84       $  366  $  212
                           ===========================================

Effective Tax Rate (3)       15.5%    2.1%  13.3%         7.5%   13.8%

Annual Effective Tax Rate
 (4)                         13.5%    7.9%  13.7%        12.5%   18.5%
(1) Our estimates change as we file tax returns, settle disputes with
     tax authorities or become aware of other events impacting our
     liabilities for income taxes. Changes in estimates include
     changes in deferred taxes, valuation allowances on deferred taxes
     or other tax liabilities and the impact of changes in currency
     exchange rates.
(2) The three months ended December 31, 2007 included $ (43) million
     of additional tax expense (benefit) reflecting the catch-up
     effect of an increase (decrease) in the annual effective tax rate
     and included $17 million related to customer identification that
     is also reflected as a reduction of revenue.
(3) Effective Tax Rate is income tax expense divided by income before
     income taxes.
(4) Annual Effective Tax Rate is income tax expense excluding various
     discrete items (such as changes in estimates and tax on items
     excluded from income before income taxes) divided by income
     before income taxes excluding gains on sales and similar items
     pursuant to Financial Accounting Standards Board Interpretation
     No. 18.

CONTACT: Transocean Inc., Houston
Analyst Contact:
Gregory S. Panagos, 713-232-7551
or
Media Contact:
Guy A. Cantwell, 713-232-7647

SOURCE: Transocean Inc.