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Transocean Ltd. Reports First Quarter 2010 Results

May 5, 2010

ZUG, SWITZERLAND, May 05, 2010 (MARKETWIRE via COMTEX) --Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $677 million, or $2.09 per diluted share, on revenues of $2.602 billion for the three months ended March 31, 2010. The results compare to net income attributable to controlling interest of $942 million, or $2.93 per diluted share, on revenues of $3.118 billion for the three months ended March 31, 2009.

First quarter 2010 results were adversely impacted by certain net charges, after tax, totaling $42 million, or $0.13 per diluted share, as follows:

--  $15 million loss on the sale of GSF Arctic II and GSF Arctic IV,
--  $16 million primarily regarding impairment charges related to
    accelerated depletion of certain oil and gas properties, and,
--  $11 million of net charges primarily related to discrete tax items

First quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $264 million, or $0.82 per diluted share, consisting of $221 million of impairments on rigs held for sale and $43 million of discrete tax items, merger-related costs and losses on the retirement of debt.

Operations Quarterly Review

Revenues for the three months ended March 31, 2010 decreased to $2.602 billion compared to $2.733 billion during the three months ended December 31, 2009. The $131 million decrease was primarily due to a $78 million reduction in contract drilling revenue resulting from the stacking of rigs in the previous quarter, a $78 million reduction in revenue from increased rig time in shipyard and mobilizations partially offset by a $49 million increase in revenue from newly constructed ultra-deepwater rigs commencing or continuing operations in the quarter.

Operating and maintenance expenses totaled $1.196 billion for the first quarter 2010, down approximately eight percent compared to $1.296 billion for the prior quarter. The $100 million quarter-to-quarter reduction in operating and maintenance costs occurred as a result of a $123 million reduction primarily in maintenance costs and a $21 million reduction in costs related to stacked rigs. These items were partially offset by a favorable impact in the prior quarter from litigation settlements and $17 million of costs in the first quarter related to the after-sale chartering of the GSF Arctic IV and $15 million of additional operating costs related to newly constructed ultra-deepwater rigs.

Depreciation, depletion and amortization expense was $401 million in the first quarter 2010, up five percent compared to $382 million for the fourth quarter 2009. The $19 million increase was primarily due to impairments related to our oil and gas properties and the commencement of operations of newly constructed ultra-deepwater rigs.

General and administrative expenses were $63 million for the first quarter 2010, compared to $46 million in the prior quarter. The $17 million increase was primarily related to an accelerated vesting of share-based compensation awards.

Liquidity and Interest Expense

Interest expense, net of amounts capitalized for the first quarter 2010 totaled $132 million, compared to $119 million in the prior quarter. The increase was primarily due to reduced capitalized interest related to the commencement of operations of newly constructed ultra-deepwater drillships in the fourth and first quarters. As of March 31, 2010, total debt was $11.439 billion, compared to $11.717 billion as of December 31, 2009, a decrease of $278 million reflecting $213 million repayment of joint venture debt, lower outstanding commercial paper program borrowings and the early retirement of the GSF Explorer capital lease.

Cash flow from operating activities totaled $1.172 billion for the first quarter 2010, in line with $1.175 billion generated in the fourth quarter 2009.

Effective Tax Rate

Transocean's reported Effective Tax Rate(1), which includes various discrete items primarily resulting from the impact of oil and gas impairments and changes in prior years tax estimates, for the first quarter 2010 was 15.8 percent. Excluding these discrete items the Annual Effective Tax Rate(2) for the first quarter was 15.0 percent.

Update on Deepwater Horizon Incident

Concurrently with this press release, we have filed a Quarterly Report on Form 10-Q with the United States Securities and Exchange Commission. The form 10-Q includes updated information on the Deepwater Horizon incident. To view the Form 10-Q filing, please use the following link: http://www.deepwater.com/fw/main/SEC-Filings-57.html

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. ET, 4:00 p.m. Swiss time, on May 6, 2010. To participate, dial +1 913-312-0650 and refer to confirmation code 4091491 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 Transocean's website at www.deepwater.com and selecting "Investor Relations." A file containing four charts to be discussed during the conference call, titled "1Q10 Charts," has been posted to Transocean's website and can also be found by selecting "Investor Relations/Quarterly Toolkit." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, "RIG."

A telephonic replay of the conference call should be available after 1:00 p.m. ET, 7:00 p.m. Swiss time, on May 6, and can be accessed by dialing +1 719-457-0820 and referring to the passcode 4091491. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.

Transocean is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 139 mobile offshore drilling units plus three ultra-deepwater units under construction, Transocean'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. Transocean owns or operates a contract drilling fleet of 45 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 26 Midwater Floaters, 10 High-Specification Jackups, 55 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 tax expense) divided by income before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

                     TRANSOCEAN LTD. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In millions, except per share data)
                                (Unaudited)
                                                      Three months ended
                                                          March 31,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
Operating revenues
  Contract drilling revenues                        $    2,441  $    2,834
  Contract drilling intangible revenues                     33         104
  Other revenues                                           128         180
                                                    ----------  ----------
                                                         2,602       3,118
                                                    ----------  ----------
Costs and expenses
  Operating and maintenance                              1,196       1,171
  Depreciation, depletion and amortization                 401         355
  General and administrative                                63          56
                                                    ----------  ----------
                                                         1,660       1,582
                                                    ----------  ----------
Loss on impairment                                          (2)       (221)
Gain (loss) on disposal of assets, net                     (14)          4
                                                    ----------  ----------
Operating income                                           926       1,319
                                                    ----------  ----------
Other income (expense), net
  Interest income                                            5           1
  Interest expense, net of amounts capitalized            (132)       (136)
  Other, net                                                15           6
                                                    ----------  ----------
                                                          (112)       (129)
                                                    ----------  ----------
Income before income tax expense                           814       1,190
Income tax expense                                         129         251
                                                    ----------  ----------
Net income                                                 685         939
Net income (loss) attributable to noncontrolling
 interest                                                    8          (3)
                                                    ----------  ----------
Net income attributable to controlling interest     $      677  $      942
                                                    ==========  ==========
Earnings per share
  Basic                                             $     2.10  $     2.94
  Diluted                                           $     2.09  $     2.93
Weighted-average shares outstanding
  Basic                                                    321         319
  Diluted                                                  322         320
                     TRANSOCEAN LTD. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In millions, except share data)
                                                    March 31,  December 31,
                                                       2010       2009
                                                    ----------  ----------
                                                    (Unaudited)
Assets
Cash and cash equivalents                           $    1,586  $    1,130
Accounts receivable, net of allowance for
 doubtful accounts of $41 and $65 at March 31,
 2010 and December 31, 2009, respectively                2,285       2,385
Materials and supplies, net of allowance for
 obsolescence of $64 and $66 at March 31, 2010
 and December 31, 2009, respectively                       464         462
Deferred income taxes, net                                 113         104
Assets held for sale                                        --         186
Other current assets                                       263         209
                                                    ----------  ----------
        Total current assets                             4,711       4,476
                                                    ----------  ----------
Property and equipment                                  27,604      27,383
Property and equipment of consolidated variable
 interest entities                                       2,149       1,968
Less accumulated depreciation                            6,728       6,333
                                                    ----------  ----------
    Property and equipment, net                         23,025      23,018
                                                    ----------  ----------
Goodwill                                                 8,132       8,134
Other assets                                               970         808
                                                    ----------  ----------
        Total assets                                $   36,838  $   36,436
                                                    ==========  ==========
Liabilities and equity
Accounts payable                                    $      746  $      780
Accrued income taxes                                       240         240
Debt due within one year                                 1,447       1,568
Debt of consolidated variable interest entities due
 within one year                                            82         300
Other current liabilities                                  787         730
                                                    ----------  ----------
        Total current liabilities                        3,302       3,618
                                                    ----------  ----------
Long-term debt                                           8,990       8,966
Long-term debt of consolidated variable interest
 entities                                                  920         883
Deferred income taxes, net                                 713         726
Other long-term liabilities                              1,707       1,684
                                                    ----------  ----------
        Total long-term liabilities                     12,330      12,259
                                                    ----------  ----------
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947
 authorized, 167,617,649 conditionally
 authorized, 335,235,298 issued at March 31, 2010
 and December 31, 2009; 320,950,624 and 321,223,882
 outstanding at March 31, 2010 and December 31, 2009,
 respectively                                            4,478       4,472
Additional paid-in capital                               7,433       7,407
Retained earnings                                        9,685       9,008
Accumulated other comprehensive loss                      (338)       (335)
Treasury shares, at cost, 717,000 and none held at
 March 31, 2010 and December 31, 2009, respectively        (60)         --
                                                    ----------  ----------
        Total controlling interest shareholders'
         equity                                         21,198      20,552
                                                    ----------  ----------
Noncontrolling interest                                      8           7
                                                    ----------  ----------
        Total equity                                    21,206      20,559
                                                    ----------  ----------
        Total liabilities and equity                $   36,838  $   36,436
                                                    ==========  ==========
                     TRANSOCEAN LTD. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In millions)
                                (Unaudited)
                                                      Three months ended
                                                          March 31,
                                                    ----------------------
                                                       2010        2009
                                                    ----------  ----------
Cash flows from operating activities
Net income                                          $      685  $      939
Adjustments to reconcile net income to net cash
 provided by operating activities
    Amortization of drilling contract intangibles          (33)       (104)
    Depreciation, depletion and amortization               401         355
    Share-based compensation expense                        35          19
    (Gain) loss on disposal of assets, net                  14          (4)
    Loss on impairment                                       2         221
    Amortization of debt issue costs, discounts and
     premiums, net                                          49          52
    Deferred income taxes                                  (22)          6
    Other, net                                               3          11
    Deferred revenue, net                                  151          (6)
    Deferred expenses, net                                 (14)          2
    Changes in operating assets and liabilities            (99)        (50)
                                                    ----------  ----------
Net cash provided by operating activities                1,172       1,441
                                                    ----------  ----------
Cash flows from investing activities
    Capital expenditures                                  (379)       (708)
    Proceeds from disposal of assets, net                   41           8
    Proceeds from distributions from short-term
     investments                                             5         221
    Joint ventures and other investments, net               10          --
                                                    ----------  ----------
Net cash used in investing activities                     (323)       (479)
                                                    ----------  ----------
Cash flows from financing activities
    Change in short-term borrowings, net                  (131)        (24)
    Proceeds from debt                                      54          88
    Repayments of debt                                    (253)       (600)
    Repurchases of convertible senior notes                 --        (102)
    Purchases of treasury shares                           (60)         --
    Proceeds from (taxes paid for) share-based
     compensation plans, net                                (4)         17
    Other, net                                               1          (2)
                                                    ----------  ----------
Net cash used in financing activities                     (393)       (623)
                                                    ----------  ----------
Net increase in cash and cash equivalents                  456         339
Cash and cash equivalents at beginning of period         1,130         963
                                                    ----------  ----------
Cash and cash equivalents at end of period          $    1,586  $    1,302
                                                    ==========  ==========
                              TRANSOCEAN LTD.
                        FLEET OPERATING STATISTICS
                                        Operating Revenues ($ Millions)
                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                      March 31,  December 31,   March 31,
                                        2010         2009         2009
                                     -----------  -----------  -----------
Contract Drilling Revenues
  High-Specification Floaters:
    Ultra Deepwater Floaters         $       901  $       890  $       702
    Deepwater Floaters                       390          449          413
    Harsh Environment Floaters               176          155          158
  Total High-Specification Floaters        1,467        1,494        1,273
  Midwater Floaters                          522          537          708
  High-Specification Jackups                  94           86          151
  Standard Jackups                           352          422          689
  Other Rigs                                   6            7           13
Subtotal                                   2,441        2,546        2,834
Contract Intangible Revenue                   33           44          104
Other Revenues
  Client Reimbursable Revenues                40           46           50
  Integrated Services and Other               30           48           53
  Drilling Management Services                51           41           70
  Oil and Gas Properties                       7            8            7
Subtotal                                     128          143          180
Total Company                        $     2,602  $     2,733  $     3,118
                                           Average Daily Revenue (1)
                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                       March 31,  December 31,  March 31,
                                         2010        2009         2009
                                     -----------  -----------  -----------
  High-Specification Floaters:
    Ultra Deepwater Floaters         $   486,000  $   486,200  $   451,000
    Deepwater Floaters               $   383,800  $   346,600  $   336,900
    Harsh Environment Floaters       $   400,100  $   405,800  $   351,100
  Total High-Specification Floaters  $   437,200  $   425,900  $   393,800
  Midwater Floaters                  $   331,600  $   325,100  $   314,700
  High-Specification Jackups         $   166,000  $   175,100  $   169,500
  Standard Jackups                   $   133,100  $   147,300  $   156,400
  Other Rigs                         $    72,700  $    72,300  $    46,700
Total Drilling Fleet                 $   298,300  $   295,700  $   256,500
                                                 Utilization (1)
                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                      March 31,  December 31,   March 31,
                                        2010         2009         2009
                                     -----------  -----------  -----------
  High-Specification Floaters:
    Ultra Deepwater Floaters                  88%          91%          96%
    Deepwater Floaters                        71%          88%          85%
    Harsh Environment Floaters                98%          83%         100%
  Total High-Specification Floaters           84%          89%          92%
  Midwater Floaters                           67%          69%          89%
  High-Specification Jackups                  63%          53%          99%
  Standard Jackups                            53%          57%          89%
  Other Rigs                                  50%          50%          99%
Total Drilling Fleet                          66%          69%          91%
(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 LTD. AND SUBSIDIARIES
                 SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS
                    (In millions, except percentages)
                                                Three months ended
                                        ----------------------------------
                                          Mar 31,     Dec 31,     Mar 31,
                                           2010        2009        2009
                                        ----------  ----------  ----------
Income before income taxes              $      814  $      898  $    1,190
  Add back (subtract):
  Loss on impairment of oil and gas
   properties                                   21           -           -
  Loss on impairment of goodwill                 2           -           -
  Loss on disposal of assets                    14           -           -
  Loss on impairment on the Reserve funds        1           -           -
  (Gain) loss on retirement of debt             (2)         12           2
  GSF merger related costs and other, net        5           5           6
  Litigation matters                             -         (24)          -
  Income from TODCO tax sharing agreement        -          (1)          -
  Gain on sale of interests in joint
   ventures                                      -         (34)          -
  Loss on impairment of assets held for
   sale                                          -           -         221
                                        ----------  ----------  ----------
Adjusted income before income taxes            855         856       1,419
Income tax expense                             129         181         251
  Add back (subtract):
  Loss on impairment of oil and gas
   properties                                    7           -           -
  GSF merger related costs                       1           -           1
  Tax effect of the Patient Protection
   and Affordable Care Act                      (2)          -           -
  Loss on impairment                             -          18           -
  Changes in estimates (1)                      (7)        (50)        (37)
                                        ----------  ----------  ----------
Adjusted income tax expense (2)         $      128  $      149  $      215
                                        ==========  ==========  ==========
Effective Tax Rate (3)                        15.8%       20.1%       21.1%
Annual Effective Tax Rate (4)                 15.0%       17.4%       15.2%
(1) Our estimates change as we file tax returns, settle disputes with tax
    authorities or become aware of other events and include changes in
    (a) deferred taxes, (b) valuation allowances on deferred taxes and
    (c) other tax liabilities.
(2) The three months ended December 31, 2009 include $11 million of
    Additional tax expense (benefit) reflecting the catch-up effect of an
    increase (decrease) in the annual effective tax rate from the previous
    quarter estimate.
(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 and losses on sales and similar items pursuant to the
    accounting standards for income taxes and estimating the annual
    effective tax rate.

SOURCE: Transocean Ltd.