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Transocean Ltd. Reports Third Quarter 2010 Results

November 3, 2010

ZUG, SWITZERLAND, Nov 03, 2010 (MARKETWIRE via COMTEX) --

Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest for the three months ended September 30, 2010 of $368 million, or $1.15 per diluted share, on revenues of $2.309 billion. The results compare to net income attributable to controlling interest of $710 million, or $2.19 per diluted share, on revenues of $2.823 billion, for the three months ended September 30, 2009.

Third quarter 2010 results included increased expenses associated with the Macondo well incident of $27 million, or $22 million after tax, calculated using our Annual Effective Tax Rate. These expenses include legal costs, internal investigation costs, professional fees and increased insurance premiums.

In addition, third quarter 2010 results were adversely impacted by $43 million of after tax items, as follows:

    -- A $22 million loss on retirement of debt associated with
       repurchases of a portion of our convertible senior notes,
    -- $14 million of additional charges related to legal matters
       not related to the Macondo well incident, and
    -- $7 million related to discrete tax items.

Third quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $148 million, or $0.46 per diluted share. These charges were related to various litigation matters, the impairment of intangible assets, the retirement of debt and certain merger-related costs, partially offset by income related to discrete tax items and gains on settlements of certain tax matters.

Operations Quarterly Review

Revenues for the three months ended September 30, 2010 were $2.309 billion compared to $2.505 billion for the three months ended June 30, 2010. The $196 million decline was primarily due to $223 million resulting from the U.S. Gulf of Mexico moratorium, $34 million resulting from the stacking of rigs and $24 million of other minor variances, partially offset by increases of $85 million resulting from reduced shipyard activity.

Operating and maintenance expenses totaled $1.213 billion for the third quarter 2010, down approximately 11 percent compared to $1.358 billion for the prior quarter. The $145 million reduction in operating and maintenance costs was primarily due to $96 million resulting from reduced activity related to the U.S. Gulf of Mexico drilling moratorium, a $65 million charge in the prior quarter for insurance deductibles from the Macondo well incident and $24 million in cost reductions primarily from the stacking of rigs. These cost reductions were partially offset by $27 million of increased costs associated with the Macondo well incident and $17 million resulting from increased maintenance costs associated with our drilling operations.

General and administrative expenses were $59 million for the third quarter 2010, compared to $58 million in the second quarter 2010.

Liquidity and Interest Expense

Interest expense, net of amounts capitalized in the third quarter 2010, totaled $142 million, compared to $141 million in the prior quarter. As of September 30, 2010, total debt was $12.840 billion, compared to $11.426 billion as of June 30, 2010, an increase of $1.414 billion. The quarter-to-quarter increase in total debt primarily reflects proceeds from a new offering of senior notes, net of repurchases of our convertible senior notes.

Cash flow from operating activities totaled $709 million for the third quarter of 2010, down from $1.269 billion for the second quarter of 2010.

As of September 30, 2010, cash and cash equivalents were $4.636 billion, compared to $2.888 billion at June 30, 2010. The increase was principally due to net proceeds from our issuance of the senior notes and cash flows from operations, partially offset by our repurchases of convertible senior notes and capital expenditures.

Effective Tax Rate

Transocean's reported Effective Tax Rate(1) for the third quarter 2010 was 23.8 percent. The higher Effective Tax Rate was due to the redeployment of certain rigs between various tax jurisdictions and included $7 million of discrete tax items. Excluding these discrete items the Annual Effective Tax Rate(2) for the third quarter was 20.8 percent.

Macondo Well Incident

Our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission includes updated information on the Macondo well 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. EDT (3:00 p.m. CET) on Thursday, November 4, 2010. Individuals who wish to participate in the teleconference call should dial +1 719-325-2298 and refer to confirmation code 4130334 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 "3Q10 Charts," has been posted to Transocean's website and can 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. EDT (6:00 p.m. CET) on November 4, 2010, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the passcode 4130334. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Both replay options will be available for approximately 30 days.

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 newbuild drillships 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  Nine months ended
                                          September 30,     September 30,
                                        ----------------  ----------------
                                          2010     2009     2010     2009
                                        -------  -------  -------  -------
Operating revenues
  Contract drilling revenues            $ 2,204  $ 2,602  $ 6,935  $ 8,061
  Contract drilling intangible revenues      23       58       85      237
  Other revenues                             82      163      396      525
                                        -------  -------  -------  -------
                                          2,309    2,823    7,416    8,823
                                        -------  -------  -------  -------
Costs and expenses
  Operating and maintenance               1,213    1,396    3,767    3,844
  Depreciation, depletion and
   amortization                             394      367    1,195    1,082
  General and administrative                 59       54      180      163
                                        -------  -------  -------  -------
                                          1,666    1,817    5,142    5,089
                                        -------  -------  -------  -------
Loss on impairment                           --      (46)      (2)    (334)
Gain (loss) on disposal of assets, net        2       (3)     256       (3)
                                        -------  -------  -------  -------
Operating income                            645      957    2,528    3,397
                                        -------  -------  -------  -------
Other income (expense), net
  Interest income                             7       --       17        2
  Interest expense, net of amounts
   capitalized                             (142)    (115)    (415)    (365)
  Loss on retirement of debt                (22)      (7)     (20)     (17)
  Other, net                                  8        9       18        9
                                        -------  -------  -------  -------
                                           (149)    (113)    (400)    (371)
                                        -------  -------  -------  -------
Income before income tax expense            496      844    2,128    3,026
Income tax expense                          118      138      345      573
                                        -------  -------  -------  -------
Net income                                  378      706    1,783    2,453
Net income (loss) attributable to
 noncontrolling interest                     10       (4)      23       (5)
                                        -------  -------  -------  -------
Net income attributable to controlling
 interest                               $   368  $   710  $ 1,760  $ 2,458
                                        =======  =======  =======  =======
Earnings per share
  Basic                                 $  1.15  $  2.20  $  5.47  $  7.63
  Diluted                               $  1.15  $  2.19  $  5.47  $  7.61
Weighted average shares outstanding
  Basic                                     319      321      320      320
  Diluted                                   319      322      320      321
                     TRANSOCEAN LTD. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In millions, except share data)
                                                September 30,  December 31,
                                                      2010         2009
                                                  -----------  -----------
                                                  (Unaudited)
Assets
Cash and cash equivalents                         $     4,636  $     1,130
Accounts receivable, net of allowance for
 doubtful accounts of $39 and $65 at September 30,
 2010 and December 31, 2009, respectively               2,299        2,385
Materials and supplies, net of allowance for
 obsolescence of $69 and $66 at September 30,
 2010 and December 31, 2009, respectively                 501          462
Deferred income taxes, net                                100          104
Assets held for sale                                       --          186
Other current assets                                      234          209
                                                  -----------  -----------
      Total current assets                              7,770        4,476
                                                  -----------  -----------
Property and equipment                                 27,644       27,383
Property and equipment of consolidated variable
 interest entities                                      2,192        1,968
Less accumulated depreciation                           7,423        6,333
                                                  -----------  -----------
   Property and equipment, net                         22,413       23,018
                                                  -----------  -----------
Goodwill                                                8,132        8,134
Other assets                                            1,015          808
                                                  -----------  -----------
      Total assets                                $    39,330  $    36,436
                                                  ===========  ===========
Liabilities and equity
Accounts payable                                  $       791  $       780
Accrued income taxes                                      226          240
Debt due within one year                                1,635        1,568
Debt of consolidated variable interest entities
 due within one year                                       82          300
Other current liabilities                               2,030          730
                                                  -----------  -----------
      Total current liabilities                         4,764        3,618
                                                  -----------  -----------
Long-term debt                                         10,237        8,966
Long-term debt of consolidated variable interest
 entities                                                 886          883
Deferred income taxes, net                                652          726
Other long-term liabilities                             1,752        1,684
                                                  -----------  -----------
      Total long-term liabilities                      13,527       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 September 30,
 2010 and December 31, 2009; 319,017,904 and
 321,223,882 outstanding at September 30, 2010
 and December 31, 2009, respectively                    4,481        4,472
Additional paid-in capital                              6,354        7,407
Treasury shares, at cost, 2,863,267 and none held
 at September 30, 2010 and December 31, 2009,
 respectively                                            (240)          --
Retained earnings                                      10,768        9,008
Accumulated other comprehensive loss                     (327)        (335)
                                                  -----------  -----------
   Total controlling interest shareholders'
    equity                                             21,036       20,552
                                                  -----------  -----------
   Noncontrolling interest                                  3            7
                                                  -----------  -----------
      Total equity                                     21,039       20,559
                                                  -----------  -----------
      Total liabilities and equity                $    39,330  $    36,436
                                                  ===========  ===========
                     TRANSOCEAN LTD. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (In millions, except share data)
                                       Three months ended Nine months ended
                                          September 30,     September 30,
                                        ----------------  ----------------
                                          2010     2009     2010     2009
                                        -------  -------  -------  -------
Cash flows from operating activities
Net income                              $   378  $   706  $ 1,783  $ 2,453
Adjustments to reconcile net income to
 net cash provided by operating
 activities
  Amortization of drilling contract
   intangibles                              (23)     (58)     (85)    (237)
  Depreciation, depletion and
   amortization                             394      367    1,195    1,082
  Share-based compensation expense           26       23       79       66
  Excess tax benefit from share-based
   compensation plans                        --       (9)      (1)     (10)
  (Gain) loss on disposal of assets,
   net                                       (2)       3     (256)       3
  Loss on impairment                         --       46        2      334
  Loss on retirement of debt                 22        7       20       17
  Amortization of debt issue costs,
   discounts and premiums, net               48       51      148      160
  Deferred income taxes                     (40)      24      (74)      50
  Other, net                                  2        7        1       30
  Deferred revenue, net                      47       29      205       72
  Deferred expenses, net                    (18)      (3)     (55)     (38)
  Changes in operating assets and
   liabilities                             (125)     213      188      441
                                        -------  -------  -------  -------
Net cash provided by operating
 activities                                 709    1,406    3,150    4,423
                                        -------  -------  -------  -------
Cash flows from investing activities
  Capital expenditures                     (304)    (540)    (983)  (2,195)
  Proceeds from disposal of assets, net      --        2       51       10
  Proceeds from insurance recoveries
   for loss of drilling unit                 --       --      560       --
  Proceeds from payments on notes
   receivable                                10       --       31       --
  Proceeds from short-term investments       --       29        5      422
  Purchases of short-term investments        --      (34)      --     (268)
  Joint ventures and other investments,
   net                                       (4)       5       (5)       5
                                        -------  -------  -------  -------
Net cash used in investing activities      (298)    (538)    (341)  (2,026)
                                        -------  -------  -------  -------
Cash flows from financing activities
  Change in short-term borrowings, net       46      254     (131)    (246)
  Proceeds from debt                      2,000       26    2,054      345
  Repayments of debt                       (691)  (1,173)    (966)  (2,583)
  Purchases of shares held in treasury       --       --     (240)      --
  Financing costs                           (15)      --      (15)      (2)
  Proceeds from (taxes paid for)
   share-based compensation plans, net       (2)      (6)      (3)      16
  Excess tax benefit from share-based
   compensation plans                        --        9        1       10
  Other, net                                 (1)       1       (3)     (14)
                                        -------  -------  -------  -------
Net cash provided by (used in)
 financing activities                     1,337     (889)     697   (2,474)
                                        -------  -------  -------  -------
Net increase (decrease) in cash and
 cash equivalents                         1,748      (21)   3,506      (77)
Cash and cash equivalents at beginning
 of period                                2,888      907    1,130      963
                                        -------  -------  -------  -------
Cash and cash equivalents at end of
 period                                 $ 4,636  $   886  $ 4,636  $   886
                                        =======  =======  =======  =======
                              TRANSOCEAN LTD.
                        FLEET OPERATING STATISTICS
                                Operating Revenues ($ Millions) (1)
                          ------------------------------------------------
                                                         Nine months ended
                               Three months ended          September 30,
                          ----------------------------  ------------------
                         September  June 30,  September
                          30, 2010    2010    30, 2009    2010      2009
                          --------  --------  --------  --------  --------
Contract Drilling Revenues
  High-Specification
   Floaters:
    Ultra Deepwater
     Floaters             $    720  $    809  $    732  $  2,430  $  2,107
    Deepwater Floaters         350       382       463     1,122     1,282
    Harsh Environment
     Floaters                  178       166       141       520       458
  Total High-Specification
   Floaters                  1,248     1,357     1,336     4,072     3,847
  Midwater Floaters            572       521       618     1,616     1,971
  High-Specification
   Jackups                      78        93       104       264       383
  Standard Jackups             298       312       537       963     1,835
  Other Rigs                     8         7         7        20        25
Subtotal                     2,204     2,290     2,602     6,935     8,061
Contract Intangible
 Revenue                        23        29        58        85       237
Other Revenues
  Client Reimbursable
   Revenues                     40        38        49       118       148
  Integrated Services and
   Other                        10        11        53        52       158
  Drilling Management
   Services                     25       129        54       204       198
  Oil and Gas Properties         7         8         7        22        21
Subtotal                        82       186       163       396       525
Total Company             $  2,309  $  2,505  $  2,823  $  7,416  $  8,823
                                     Average Daily Revenue (1)
                          ------------------------------------------------
                                                         Nine months ended
                               Three months ended          September 30,
                          ----------------------------  ------------------
                         September  June 30,  September
                          30, 2010    2010    30, 2009    2010      2009
                          --------  --------  --------  --------  --------
  High-Specification
   Floaters:
    Ultra Deepwater
     Floaters             $422,800  $482,100  $458,500  $464,200  $453,400
    Deepwater Floaters    $365,600  $395,800  $355,600  $381,800  $344,300
    Harsh Environment
     Floaters             $414,100  $428,500  $386,000  $413,600  $369,400
  Total High-Specification
   Floaters               $403,900  $447,800  $409,300  $431,800  $400,300
  Midwater Floaters       $328,400  $319,000  $355,800  $326,300  $322,200
  High-Specification
   Jackups                $138,100  $146,100  $161,000  $149,900  $164,400
  Standard Jackups        $113,200  $117,100  $156,200  $121,100  $153,800
  Other Rigs              $ 72,900  $ 72,000  $ 73,300  $ 72,600  $ 51,400
Total Drilling Fleet      $271,200  $284,200  $283,800  $284,600  $264,500
                                          Utilization (1)
                          ------------------------------------------------
                                                         Nine months ended
                               Three months ended          September 30,
                          ----------------------------  ------------------
                         September  June 30,  September
                          30, 2010    2010    30, 2009    2010      2009
                          --------  --------  --------  --------  --------
  High-Specification
   Floaters:
    Ultra Deepwater
     Floaters                   77%       76%       90%       80%       93%
    Deepwater Floaters          65%       66%       89%       67%       85%
    Harsh Environment
     Floaters                   93%       85%       80%       92%       91%
  Total High-Specification
   Floaters                     75%       74%       88%       77%       89%
  Midwater Floaters             73%       69%       72%       70%       82%
  High-Specification
   Jackups                      61%       70%       70%       65%       85%
  Standard Jackups              52%       53%       68%       53%       79%
  Other Rigs                    50%       50%       42%       50%       70%
Total Drilling Fleet            64%       64%       75%       65%       83%
(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)
                                   Three months ended     Nine months ended
                               -------------------------  ----------------
                               Sept 30, June 30, Sept 30, Sept 30, Sept 30,
                                 2010     2010     2009     2010     2009
                               -------  -------  -------  -------  -------
Income before income taxes     $   497  $   818  $   844  $ 2,129  $ 3,026
 Add back (subtract):
    Litigation matters              14       12      132       26      132
    Gain on loss of Deepwater
     Horizon                         -     (267)       -     (267)       -
    Loss on disposal of other
     assets, net                     -        -       (1)      14        2
    Loss on impairment of
     goodwill and intangible
     assets                          -        -       46        2      334
    Loss on impairment of
     other assets                    -        -        -       21        -
    (Gain) loss on retirement
     of debt                        22        -        7       20       17
    GSF merger related costs
     and other, net                  -        -        4        6       12
    Income from TODCO tax
     sharing agreement               -        -      (11)       -      (11)
                               -------  -------  -------  -------  -------
Adjusted income before income
 taxes                             533      563    1,021    1,951    3,512
Income tax expense                 118       98      138      345      573
 Add back (subtract):
    Loss on impairment of
     other assets                    -        -        -        7        -
    GSF merger related costs         -        -        1        1        2
    Tax effect of the Patient
     Protection and Affordable
     Care Act                        -        -        -       (2)       -
    Changes in estimates(1)         (7)      (6)      28      (20)     (24)
                               -------  -------  -------  -------  -------
Adjusted income tax expense(2) $   111  $    92  $   167  $   331  $   551
                               =======  =======  =======  =======  =======
Effective Tax Rate(3)             23.8%    12.0%    16.4%    16.2%    18.9%
Annual Effective Tax Rate(4)      20.8%    16.3%    16.4%    17.0%    15.7%
(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 September 30, 2010 includes $21 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.