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Transocean Ltd. Reports First Quarter 2011 Results

May 4, 2011

ZUG, SWITZERLAND, May 04, 2011 (MARKETWIRE via COMTEX) --

Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $310 million, or $0.96 per diluted share, for the three months ended March 31, 2011. The results compare to net income attributable to controlling interest of $677 million, or $2.09 per diluted share for the three months ended March 31, 2010.

First quarter 2011 results included the following items, after tax, that resulted in a net positive impact of approximately $139 million, or $0.43 per diluted share:

  • $176 million of income from discontinued operations, nearly all of which is from the gain on the sale of the Trident 20,
    • $9 million from the gain on the sale of the Transocean Mercury,
        $8 million of net charges related to litigation matters not associated with the Macondo well incident, and
      • $38 million of net charges primarily related to discrete tax items.

      First quarter 2011 results also included expenses associated with the Macondo well incident of $23 million, $19 million after tax, or $0.06 per diluted share. These expenses were primarily related to increased insurance premiums and legal costs.

      Operations Quarterly Review

      Revenues for the three months ended March 31, 2011 were $2.144 billion, compared to revenues of $2.127 billion during the three months ended December 31, 2010. First quarter contract drilling revenues were impacted by lower utilization and revenue efficiency. Our Deepwater and Midwater Floater fleets experienced lower utilization due to the stacking of rigs, as well as increased shipyard time related to contract preparation, special periodic surveys and major maintenance projects. Compliance with new well control equipment certification requirements, higher standards for equipment condition and capacity constraints on our vendors contributed to reduced revenue efficiency among our Ultra-Deepwater and Deepwater Floaters. Partially offsetting lower contract drilling revenue was additional revenue from two newbuild rigs commencing operations. Other revenues increased primarily from additional drilling management services activity.

      Operating and maintenance expenses totaled $1.359 billion for the first quarter 2011, up slightly from $1.339 billion for the prior quarter. The change was due to increased drilling management services activity, which was partially offset by reduced rig-related maintenance costs.

      Depreciation and amortization expense was $354 million in the first quarter 2011 compared to $381 million in the prior quarter. The $27 million decrease was primarily due to the reduced carrying amounts of our Standard Jackups resulting from the approximately $1 billion asset impairment recognized on that asset group during the fourth quarter 2010.

      Liquidity and Interest Expense

      Interest expense, net of amounts capitalized for the first quarter 2011, was $145 million, compared to $152 million in the fourth quarter 2010.

      Cash flow from operating activities decreased to $390 million for the first quarter 2011 compared to $796 million for the fourth quarter 2010. The decline in cash flow from operations resulted primarily from an increase in working capital.

      Effective Tax Rate

      Transocean's Annual Effective Tax Rate(1) for the first quarter 2011, which excludes various discrete items, was 19.3 percent. The Effective Tax Rate(2) for the first quarter was 33.1 percent, primarily reflecting the impact of discrete items resulting from changes in estimates.

      Conference Call Information

      Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on May 5, 2011. To participate, dial +1 719-325-2234 and refer to confirmation code 8570996 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 "1Q11 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. EDT, 7:00 p.m. CEST, on May 5, 2011, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 8570996. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced internet addresses. Both replay options will be available for approximately 30 days.

      About Transocean

      Transocean is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 137 mobile offshore drilling units as well as one ultra-deepwater drillship and three high-specification jackups 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 47 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 25 Midwater Floaters, nine High-Specification Jackups, 53 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

      (1) 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."

      (2) 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."

      For more information about Transocean, please visit our website at www.deepwater.com.

                          TRANSOCEAN LTD. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         (In millions, except per share data)
                                      (Unaudited)
                                                           Three months ended
                                                                March 31,
                                                        ------------------------
                                                            2011         2010
                                                        -----------  -----------
                                                                    (As adjusted)
      Operating revenues
        Contract drilling revenues                      $     1,950  $     2,425
        Contract drilling intangible revenues                    10           33
        Other revenues                                          184          121
                                                        -----------  -----------
                                                              2,144        2,579
                                                        -----------  -----------
      Costs and expenses
        Operating and maintenance                             1,359        1,186
        Depreciation and amortization                           354          374
        General and administrative                               67           63
                                                        -----------  -----------
                                                              1,780        1,623
                                                        -----------  -----------
      Gain (loss) on disposal of assets, net                      8          (14)
                                                        -----------  -----------
      Operating income                                          372          942
                                                        -----------  -----------
      Other income (expense), net
        Interest income                                          15            5
        Interest expense, net of amounts capitalized           (145)        (132)
        Other, net                                                3           15
                                                        -----------  -----------
                                                               (127)        (112)
                                                        -----------  -----------
      Income from continuing operations before income
       tax expense                                              245          830
      Income tax expense                                         81          147
                                                        -----------  -----------
      Income from continuing operations                         164          683
      Income from discontinued operations, net of tax           176            2
                                                        -----------  -----------
      Net income                                                340          685
      Net income attributable to noncontrolling
       interest                                                  30            8
                                                        -----------  -----------
      Net income attributable to controlling interest   $       310  $       677
                                                        ===========  ===========
      Earnings per share-basic
        Earnings from continuing operations             $      0.42  $      2.09
        Earnings from discontinued operations                  0.54         0.01
                                                        -----------  -----------
        Earnings per share                                     0.96         2.10
                                                        ===========  ===========
      Earnings per share-diluted
        Earnings from continuing operations             $      0.42  $      2.08
        Earnings from discontinued operations                  0.54         0.01
                                                        -----------  -----------
        Earnings per share                                     0.96         2.09
                                                        ===========  ===========
      Weighted-average shares outstanding
        Basic                                                   319          321
        Diluted                                                 320          322
                           TRANSOCEAN LTD. AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                           (In millions, except share data)
                                      (Unaudited)
                                                         March 31,   December 31,
                                                           2011         2010
                                                        -----------  -----------
                                                                    (As adjusted)
      Assets
      Cash and cash equivalents                         $     3,812  $     3,394
      Accounts receivable, net of allowance for
       doubtful accounts of $33 and $38 at March 31,
       2011 and December 31, 2010, respectively               2,161        1,978
      Materials and supplies, net of allowance for
       obsolescence of $70 at March 31, 2011 and
       December 31, 2010                                        541          514
      Deferred income taxes, net                                116          115
      Assets held for sale                                       77           --
      Other current assets                                      197          194
                                                        -----------  -----------
          Total current assets                                6,904        6,195
                                                        -----------  -----------
      Property and equipment                                 26,819       26,721
      Property and equipment of consolidated variable
       interest entities                                      2,241        2,214
      Less accumulated depreciation                           7,887        7,616
                                                        -----------  -----------
        Property and equipment, net                          21,173       21,319
                                                        -----------  -----------
      Goodwill                                                8,132        8,132
      Other assets                                            1,001        1,165
                                                        -----------  -----------
          Total assets                                  $    37,210  $    36,811
                                                        ===========  ===========
      Liabilities and equity
      Accounts payable                                  $       808  $       832
      Accrued income taxes                                       67          109
      Debt due within one year                                1,965        1,917
      Debt of consolidated variable interest entities
       due within one year                                       95           95
      Other current liabilities                                 906          883
                                                        -----------  -----------
          Total current liabilities                           3,841        3,836
                                                        -----------  -----------
      Long-term debt                                          8,361        8,354
      Long-term debt of consolidated variable interest
       entities                                                 820          855
      Deferred income taxes, net                                586          575
      Other long-term liabilities                             1,840        1,791
                                                        -----------  -----------
          Total long-term liabilities                        11,607       11,575
                                                        -----------  -----------
      Commitments and contingencies
      Redeemable noncontrolling interest                         57           25
      Shares, CHF 15.00 par value, 335,235,298
       authorized, 167,617,649 conditionally
       authorized, 335,235,298 issued at March 31, 2011
       and December 31, 2010; 319,538,901 and
       319,080,678 outstanding at March 31, 2011 and
       December 31, 2010, respectively                        4,488        4,482
      Additional paid-in capital                              7,518        7,504
      Treasury shares, at cost, 2,863,267 held at
       March 31, 2011 and December 31, 2010                    (240)        (240)
      Retained earnings                                      10,279        9,969
      Accumulated other comprehensive loss                     (335)        (332)
                                                        -----------  -----------
         Total controlling interest shareholders'
          equity                                             21,710       21,383
                                                        -----------  -----------
         Noncontrolling interest                                 (5)          (8)
                                                        -----------  -----------
          Total equity                                       21,705       21,375
                                                        -----------  -----------
          Total liabilities and equity                  $    37,210  $    36,811
                                                        ===========  ===========
                           TRANSOCEAN LTD. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (In millions)
                                     (Unaudited)
                                                           Three months ended
                                                                March 31,
                                                        ------------------------
                                                            2011         2010
                                                        -----------  -----------
                                                                    (As adjusted)
      Cash flows from operating activities
        Net income                                      $       340  $       685
        Adjustments to reconcile net income to net
         cash provided by operating activities:
          Amortization of drilling contract
           intangibles                                          (10)         (33)
          Depreciation and amortization                         354          374
          Share-based compensation expense                       27           35
          Gain on disposal of discontinued operations          (173)          --
          (Gain) loss on disposal of assets, net                 (8)          14
          Amortization of debt issue costs, discounts
           and premiums, net                                     26           49
          Deferred income taxes                                  11          (22)
          Other, net                                             (3)          31
          Deferred revenue, net                                  46          151
          Deferred expenses, net                                (36)         (14)
          Changes in operating assets and liabilities          (184)         (98)
                                                        -----------  -----------
      Net cash provided by operating activities                 390        1,172
                                                        -----------  -----------
      Cash flows from investing activities
        Capital expenditures                                   (240)        (369)
        Proceeds from disposal of assets, net                    13           41
        Proceeds from disposal of discontinued
         operations                                             259           --
        Other, net                                               (6)           5
                                                        -----------  -----------
      Net cash provided by (used in) investing
       activities                                                26         (323)
                                                        -----------  -----------
      Cash flows from financing activities
        Change in short-term borrowings, net                     51         (131)
        Proceeds from debt                                        5           54
        Repayments of debt                                      (47)        (253)
        Purchases of shares held in treasury                     --          (60)
        Other, net                                               (7)          (3)
                                                        -----------  -----------
      Net cash provided by (used in) financing
       activities                                                 2         (393)
                                                        -----------  -----------
      Net increase in cash and cash equivalents                 418          456
                                                        -----------  -----------
      Cash and cash equivalents at beginning of period        3,394        1,130
                                                        -----------  -----------
      Cash and cash equivalents at end of period        $     3,812  $     1,586
                                                        ===========  ===========
                                    TRANSOCEAN LTD.
                              FLEET OPERATING STATISTICS
                                            Operating Revenues ($ Millions) (1)
                                           -------------------------------------
                                                     Three months ended
                                           -------------------------------------
                                            March 31,   December 31,  March 31,
                                              2011         2010         2010
                                           -----------  -----------  -----------
      Contract Drilling Revenues
        High-Specification Floaters:
          Ultra Deepwater Floaters         $       844  $       740  $       901
          Deepwater Floaters                       290          339          390
          Harsh Environment Floaters               150          155          176
        Total High-Specification Floaters        1,284        1,234        1,467
        Midwater Floaters                          400          477          522
        High-Specification Jackups                  31           33           77
        Standard Jackups                           229          259          352
        Other Rigs                                   6            6            7
      Subtotal                                   1,950        2,009        2,425
      Contract Intangible Revenue                   10           13           33
      Other Revenues
        Client Reimbursable Revenues                37           34           40
        Integrated Services and Other               15           15           30
        Drilling Management Services               132           56           51
      Subtotal                                     184          105          121
      Total Company                        $     2,144  $     2,127  $     2,579
                                                 Average Daily Revenue  (1)
                                           -------------------------------------
                                                     Three months ended
                                           -------------------------------------
                                            March 31,   December 31,  March 31,
                                              2011         2010         2010
                                           -----------  -----------  -----------
        High-Specification Floaters:
          Ultra Deepwater Floaters         $   467,700  $   435,900  $   486,000
          Deepwater Floaters               $   395,900  $   395,600  $   383,800
          Harsh Environment Floaters       $   402,400  $   366,800  $   400,100
        Total High-Specification Floaters  $   441,300  $   414,500  $   443,200
        Midwater Floaters                  $   313,000  $   298,500  $   331,600
        High-Specification Jackups         $   106,200  $   129,400  $   162,600
        Standard Jackups                   $   109,200  $   110,600  $   133,100
        Other Rigs                         $    73,400  $    73,000  $    72,700
      Total Drilling Fleet                 $   292,600  $   276,900  $   299,600
                                                       Utilization (1)
                                           -------------------------------------
                                                     Three months ended
                                           -------------------------------------
                                            March 31,   December 31,  March 31,
                                              2011         2010         2010
                                           -----------  -----------  -----------
        High-Specification Floaters:
          Ultra Deepwater Floaters                  77%          76%          88%
          Deepwater Floaters                        51%          58%          71%
          Harsh Environment Floaters                83%          92%          98%
        Total High-Specification Floaters           69%          71%          83%
        Midwater Floaters                           60%          68%          67%
        High-Specification Jackups                  40%          31%          59%
        Standard Jackups                            43%          46%          53%
        Other Rigs                                  49%          48%          50%
      Total Drilling Fleet                          55%          58%          66%
                           Transocean Ltd. and Subsidiaries
                       Supplemental Effective Tax Rate Analysis
                                  (In US$ millions)
                                           -------------------------------------
                                                     Three months ended
                                           -------------------------------------
                                             Mar 31,      Dec 31,      Mar 31,
                                               2011         2010         2010
                                           -----------  -----------  -----------
                                                       (As adjusted)(As adjusted)
      Income from continuing operations
       before income taxes                         245         (836)         830
        Add back (subtract):
          Litigation matters                         8            1            -
          (Gain) loss on disposal of other
           assets, net                              (9)           -           14
          Loss on impairment of other
           assets, net                               -        1,010            -
          (Gain) loss on retirement of
           debt                                      -           13           (2)
          Other, net                                 5           (8)           5
                                           -----------  -----------  -----------
      Adjusted income from continuing
       operations before income taxes              249          180          847
      Income tax expense from continuing
       operations                                   81          (32)         147
        Add back (subtract):
          Changes in estimates (1)                 (35)          (8)         (17)
          Other, net                                 2            -           (1)
                                           -----------  -----------  -----------
      Adjusted income tax expense from
       continuing operations (2)                    48          (40)         129
                                           -----------  -----------  -----------
      Effective Tax Rate (3)                      33.1%         3.8%        17.7%
      Annual Effective Tax Rate (4)               19.3%       -22.1%        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, 2010 includes ($65) 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.