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Transocean Ltd. Reports Third Quarter 2013 Earnings Results

November 6, 2013

ZUG SWITZERLAND, Nov. 6, 2013 - Transocean Ltd. (NYSE: RIG) (SIX: RIGN)

  • Third quarter 2013 revenues were $2.558 billion, compared with $2.397 billion in the second quarter of 2013;
  • Operating and maintenance expenses for the third quarter were $1.491 billion, compared with $1.393 billion in the second quarter of 2013;
  • Third quarter 2013 net income attributable to controlling interest was $546 million, which included $47 million of net favorable items. This compares with the second quarter 2013 net income attributable to controlling interest of $307 million, which included $85 million of net unfavorable items;
  • Third quarter Annual Effective Tax Rate(1) was 19.0 percent, compared with 23.5 percent in the second quarter of 2013;
  • Third quarter 2013 net income attributable to controlling interest was $546 million, or $1.50 per diluted share.  After adjusting for net favorable items, adjusted earnings from continuing operations were $499 million, or $1.37 per diluted share;
  • Cash flows from operating activities were $623 million in the third quarter, compared with $416 million in the second quarter of 2013;
  • Revenue efficiency(2) was 94.0 percent in the third quarter, compared with 93.1 percent in the second quarter of 2013. Ultra-deepwater revenue efficiency was 92.5 percent, compared with 91.1 percent in the prior quarter;
  • Total fleet rig utilization(3) was 83 percent in the third quarter, compared with 80 percent in the prior quarter; and
  • Contract backlog was $29.8 billion as of the October 16, 2013 Fleet Status Report. Since October 16, 2013, additional backlog totaling $166 million was secured.

ZUG, SWITZERLAND - Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $546 million, or $1.50 per diluted share, for the three months ended September 30, 2013.  Third quarter 2013 results included net favorable items, after tax, of $47 million, or $0.13 per diluted share, as follows:

  • $55 million, or $0.14 per diluted share, in favorable discrete tax benefits;
  • 22 million, or $0.06 per diluted share, associated with gains on disposal of assets; and
  • $4 million, or $0.02 per diluted share, in income associated with discontinued operations.

These net favorable items were partially offset by:

  • $19 million, or $0.05 per diluted share, related to an unfavorable adjustment in contingencies associated with the Macondo well incident; and
  • $15 million, or $0.04 per diluted share, of costs associated with severance plans established for the company's previously announced shore-based organizational efficiency initiative.

After consideration of these net favorable items, third quarter 2013 adjusted earnings from continuing operations were $499 million, or $1.37 per diluted share. A reconciliation of the non-GAAP adjusted net income and diluted earnings per share is included in the accompanying schedules.

In addition to the items above, third quarter 2013 results also included approximately $11 million, or $0.03 per diluted share, in charges related to accelerated recognition of existing compensation plans associated with the implementation of the company's shore-based organizational efficiency initiative.

The third quarter 2013 results compare with a net loss attributable to controlling interest of $381 million, or $1.06 per diluted share, for the three months ended September 30, 2012, which included net unfavorable items of $887 million, or $2.46 per diluted share. The net unfavorable items were mostly due to $881 million, or $2.45 per diluted share, associated with the loss on impairment of assets included in discontinued operations primarily related to exiting the standard jackup market. After consideration of these net unfavorable items, third quarter 2012 adjusted earnings from continuing operations were $506 million, or $1.40 per diluted share.

Operations Quarterly Review

Revenues for the three months ended September 30, 2013 were $2.558 billion, compared with revenues of $2.397 billion during the quarter ended June 30, 2013.  Contract drilling revenues increased $81 million primarily due to higher utilization on the Discoverer Seven Seas and the GSF Explorer.  Higher fleet revenue efficiency, and higher dayrates, primarily in the North Sea, also contributed to the sequential increase in contract drilling revenues. Total fleet utilization was 83 percent in the third quarter of 2013, compared with 80 percent in the prior quarter.  Total fleet revenue efficiency was 94.0 percent in the third quarter, compared with 93.1 percent in the second quarter of 2013.  Other revenues increased $80 million to $156 million for the third quarter of 2013, compared with $76 million in the prior quarter, primarily due to increased drilling management services activity.

Operating and maintenance expenses increased $98 million to $1.491 billion for the third quarter of 2013, compared with $1.393 billion for the prior quarter. The sequential increase in operating and maintenance expenses was primarily due to $64 million associated with drilling management services activity. Contract drilling expenses were also higher mainly due to shipyard costs and an unfavorable adjustment in contingencies associated with the Macondo well incident.

General and administrative expenses were $67 million for the third quarter of 2013, compared with $77 million in the previous quarter. Second quarter 2013 general and administrative expenses included certain overhead costs that were not repeated in the third quarter of 2013.

Third quarter 2013 results included approximately $27 million in costs associated with severance and the accelerated recognition of existing compensation plans due to the implementation of the shore-based organizational efficiency initiative.  Approximately $22 million of this cost was included in operating and maintenance expenses and $5 million was included in general and administrative expenses.

Annual Effective Tax Rate

Transocean's third quarter Effective Tax Rate(4) was 10.4 percent, compared with 28.8 percent in the second quarter of 2013.  The decrease in the Effective Tax Rate was due to changes in estimates, primarily related to settlements of prior years' tax liabilities.  Transocean's Annual Effective Tax Ratefrom continuing operations for the third quarter of 2013 was 19.0 percent. This compares with 23.5 percent for the prior quarter. The decrease was primarily due to changes in the annual provision estimate due to favorable tax legislation and court rulings, the blend of income that is taxed based on gross revenues versus pre-tax income and rig movements between taxing jurisdictions, among other items. Third quarter 2013 income tax expense included a favorable tax benefit of $9 million, or $0.03 per diluted share, to reflect the decrease in the Annual Effective Tax Rate to 20.6 percent for the nine months ended September 30, 2013, from 21.6 percent for the six months ended June 30, 2013.

Other Items

Interest expense, net of amounts capitalized, was $142 million in the third quarter of 2013, compared with $146 million in the prior quarter. Capitalized interest for the third quarter was $19 million, compared with $16 million in the second quarter of 2013.  Interest income was $11 million in the third quarter of 2013, unchanged from the prior quarter.

Cash flows from operating activities were $623 million for the third quarter, compared with $416 million for the second quarter of 2013.  Capital expenditures increased $98 million to $450 million for the third quarter, compared with $352 million in the second quarter of 2013.  The increase in capital expenditures was primarily associated with the company's newbuild program.

Forward-Looking Statements

The statements described in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements which could be made include, but are not limited to, changes in tax estimates, statements involving anticipated reduction in costs, timing of costs savings or expectations of the onshore organizational efficiency initiative and the offshore operations initiative, or the company's competitiveness.  These include but are not limited to operating hazards and delays, risks associated with international operations, actions by customers and other third parties, the future prices of oil and gas and other factors, including those discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2012, Quarterly Report on Form10-Q for the quarters ended March 31, 2013 and June 30, 2013, and in the company's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's web site at www.deepwater.com.

This press release or referenced documents does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and it does not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange. Investors must rely on their own evaluation of Transocean Ltd. and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean Ltd.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. EST, 4:00 p.m. CET, on Thursday, November 7, 2013.  To participate, dial +1 913-643-4201 and refer to confirmation code 7221105 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." 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."  Supplemental materials that may be referenced during the conference call have been posted to Transocean's website and can be found by selecting "Investor Relations/Quarterly Toolkit."  

A telephonic replay of the conference call should be available after 1:00 p.m. EST, 7:00 p.m. CET, on November 7, 2013, and can be accessed by dialing +1 719-457-0820 and referring to the confirmation code 7221105.  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 a leading international provider of offshore contract drilling services for oil and gas wells. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world. 

Transocean owns or has partial ownership interests in, and operates a fleet of, 80 mobile offshore drilling units consisting of 46 high-specification floaters (ultra-deepwater, deepwater and harsh environment drilling rigs), 22 midwater floaters and 12 high-specification jackups. In addition, the company has seven ultra-deepwater drillships and five high-specification jackups under construction.

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

Analyst Contacts:

Thad Vayda
+1 713-232-7551

Diane Vento
+1 713-232-8015

Media Contact:

Guy A. Cantwell
+ 1 713-232-7647

Notes

(1) Annual Effective Tax Rate is defined as income tax expense from continuing operations excluding various discrete items (such as changes in estimates and tax on items excluded from income before income tax expense) divided by income from continuing operations before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

(2) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions.   See the accompanying schedule entitled "Revenue Efficiency."

(3) Rig utilization is defined as the total number of operating days divided by the total number of rig calendar days in the measurement period, expressed as a percentage.  See the accompanying schedule entitled "Utilization."

 (4) Effective Tax Rate is defined as income tax expense from continuing operations divided by income from continuing operations before income taxes. 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
September 30,
Nine months ended
September 30,
2013 2012 2013 2012
Operating revenues
Contract drilling revenues $ 2,402 $ 2,310 $ 6,868 $ 6,498
Other revenues 156 121 284 372
2,558 2,431 7,152 6,870
Costs and expenses
Operating and maintenance 1,491 1,321 4,259 4,668
Depreciation 273 280 834 845
General and administrative 67 69 211 217
1,831 1,670 5,304 5,730
Loss on impairment (17 ) - (54 ) (140 )
Gain on disposal of assets, net 32 50 23 40
Operating income 742 811 1,817 1,040
Other income (expense), net
Interest income 11 15 39 43
Interest expense, net of amounts capitalized (142 ) (180 ) (445 ) (543 )
Other, net (4 ) (8 ) (21 ) (32 )
(135 ) (173 ) (427 ) (532 )
Income from continuing operations before income tax expense 607 638 1,390 508
Income tax expense 63 105 212 124
Income from continuing operations 544 533 1,178 384
Income (loss) from discontinued operations, net of tax 4 (916 ) (6 ) (1,052 )
Net income (loss) 548 (383 ) 1,172 (668 )
Net income (loss) attributable to noncontrolling interest 2 (2 ) (2 ) 7
Net income (loss) attributable to controlling interest $ 546 $ (381 ) $ 1,174 $ (675 )
Earnings (loss) per share-basic
Earnings from continuing operations $ 1.49 $ 1.49 $ 3.25 $ 1.06
Earnings (loss) from discontinued operations 0.01 (2.55 ) (0.02 ) (2.96 )
Earnings (loss) per share $ 1.50 $ (1.06 ) $ 3.23 $ (1.90 )
Earnings (loss) per share-diluted
Earnings from continuing operations $ 1.49 $ 1.49 $ 3.25 $ 1.06
Earnings (loss) from discontinued operations 0.01 (2.55 ) (0.02 ) (2.96 )
Earnings (loss) per share $ 1.50 $ (1.06 ) $ 3.23 $ (1.90 )
Weighted-average shares outstanding
Basic 360 359 360 354
Diluted 361 359 360 354

TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)

September 30,
2013
December 31,
2012
Assets
Cash and cash equivalents $ 3,559 $ 5,134
Accounts receivable, net of allowance for doubtful accounts
of $20 at September 30, 2013 and December 31, 2012
2,367 2,200
Materials and supplies, net of allowance for obsolescence
of $71 and $66 at September 30, 2013 and December 31, 2012, respectively
729 610
Assets held for sale 131 179
Deferred income taxes, net 173 142
Other current assets 414 382
Total current assets 7,373 8,647
Property and equipment 27,707 26,967
Less accumulated depreciation (7,596 ) (7,118 )
Property and equipment of consolidated variable interest entities, net of accumulated depreciation 985 1,031
Property and equipment, net 21,096 20,880
Goodwill 2,987 2,987
Other assets 1,145 1,741
Total assets $ 32,601 $ 34,255
Liabilities and equity
Accounts payable $ 962 $ 1,047
Accrued income taxes 176 116
Debt due within one year 162 1,339
Debt of consolidated variable interest entities due within one year 58 28
Other current liabilities 2,418 2,933
Total current liabilities 3,776 5,463
Long-term debt 10,388 10,929
Long-term debt of consolidated variable interest entities 120 163
Deferred income taxes, net 341 366
Other long-term liabilities 1,717 1,604
Total long-term liabilities 12,566 13,062
Commitments and contingencies
Shares, CHF 15.00 par value, 373,830,649 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 360,559,090 outstanding at September 30, 2013 and 402,282,355 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 359,505,251 outstanding at December 31, 2012 5,145 5,130
Additional paid-in capital 6,766 7,521
Treasury shares, at cost, 2,863,267 held at September 30, 2013 and December 31, 2012 (240) (240 )
Retained earnings 5,029 3,855
Accumulated other comprehensive loss (426) (521 )
Total controlling interest shareholders' equity 16,274 15,745
Noncontrolling interest (15) (15 )
Total equity 16,259 15,730
Total liabilities and equity $ 32,601 $ 34,255

TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

Three months ended
September 30,
Nine months ended
September 30,
2013 2012 2013 2012
Cash flows from operating activities
Net income (loss) $ 548 $ (383 ) $ 1,172 $ (668 )
Adjustments to reconcile to net cash provided by operating activities
Amortization of drilling contract intangibles (5 ) (9 ) (21 ) (32 )
Depreciation 273 280 834 845
Depreciation and amortization of assets in discontinued operations - 48 - 183
Share-based compensation expense 36 24 85 72
Loss on impairment 17 - 54 140
Loss on impairment of assets in discontinued operations 14 878 14 983
Gain on disposal of assets, net (32 ) (50 ) (23 ) (40 )
(Gain) loss on disposal of assets in discontinued operations, net (31 ) 1 (49 ) (70 )
Amortization of debt issue costs, discounts and premiums, net 2 17 4 52
Deferred income taxes (28 ) (61 ) (64 ) (104 )
Other, net 25 12 73 47
Changes in deferred revenue, net (33 ) (64 ) (68 ) (69 )
Changes in deferred expenses, net 30 51 38 30
Changes in operating assets and liabilities (193 ) 42 (904 ) 416
Net cash provided by operating activities 623 786 1,145 1,785
Cash flows from investing activities
Capital expenditures (450 ) (201 ) (1,290 ) (646 )
Capital expenditures for discontinued operations - (24 ) - (75 )
Proceeds from disposal of assets, net 170 181 174 189
Proceeds from disposal of assets in discontinued operations, net 68 2 131 196
Proceeds from sale of preference shares - - 185 -
Other, net 2 7 14 32
Net cash used in investing activities (210 ) (35 ) (786 ) (304 )
Cash flows from financing activities
Changes in short-term borrowings, net - - - (260 )
Proceeds from debt - 1,493 - 1,493
Repayments of debt (77 ) (264 ) (1,673 ) (584 )
Proceeds from restricted cash investments 77 106 283 298
Deposits to restricted cash investments (8 ) (42 ) (112 ) (158 )
Distribution of qualifying additional paid-in capital (202 ) - (404 ) (278 )
Other, net (1 ) (7 ) (28 ) (8 )
Net cash provided by (used in) financing activities (211 ) 1,286 (1,934 ) 503
Net increase (decrease) in cash and cash equivalents 202 2,037 (1,575 ) 1,984
Cash and cash equivalents at beginning of period 3,357 3,964 5,134 4,017
Cash and cash equivalents at end of period $ 3,559 $ 6,001 $ 3,559 $ 6,001

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS

Operating Revenues (in millions)
Three months ended Nine months ended
September 30,
September 30,
2013
June 30,
2013
September 30,
2012
2013 2012
Contract drilling revenues
        High-Specification Floaters:
                Ultra-Deepwater Floaters: $ 1,177 $ 1,201 $ 1,213 $ 3,425 $ 3,446
    Deepwater Floaters 345 289 306 887 876
    Harsh Environment Floaters 300 285 247 867 766
        Total High-Specification Floaters 1,822 1,775 1,766 5,179 5,088
  Midwater Floaters 419 381 424 1,229 1,108
        High-Specification Jackups 157 158 110 439 270
Contract intangible revenue 4 7 10 21 32
Total contract drilling revenues 2,402 2,321 2,310 6,868 6,498
Other revenues
        Client reimbursable revenues 46 41 46 125 123
        Integrated services and other 2 2 - 4 6
        Drilling management services - non US 108 33 75 155 243
Total other revenues 156 76 121 284 372
Total revenues 2,558 2,397 2,431 7,152 6,870
Average Daily Revenue (1)
Three months ended Nine months ended
September 30,
September 30,
2013
June 30,
 2013
September 30,
2012
2013 2012
        High-Specification Floaters:
                Ultra-Deepwater Floaters $ 525,900 $ 507,600 $ 515,000 $ 497,000 $ 495,600
    Deepwater Floaters 363,400 351,800 356,300 348,800 338,500
    Harsh Environment Floaters 466,800 447,500 421,000 456,300 436,100
        Total High-Specification Floaters 475,700 464,200 464,600 456,900 450,400
  Midwater Floaters 316,400 301,100 264,500 302,700 255,200
        High-Specification Jackups 164,300 165,800 154,600 164,500 134,300
Total $ 392,400 $ 382,900 $ 376,200 $ 379,000 $ 366,400
  1. Average daily revenue is defined as contract drilling revenue earned per operating day. An operating day is defined as a calendar day during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations.  

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS (continued)

Utilization (2)
Three months ended Nine months ended
September 30,
September 30,
2013
June 30,
2013
September,
2012
2013 2012
        High-Specification Floaters:
                Ultra-Deepwater Floaters 90% 96% 95% 94% 94%
    Deepwater Floaters 83% 64% 63% 69% 61%
    Harsh Environment Floaters 100% 100% 91% 100% 92%
        Total High-Specification Floaters 90% 88% 85% 88% 83%
  Midwater Floaters 63% 56% 70% 61% 63%
        High-Specification Jackups 95% 100% 86% 96% 86%
Total Drilling Fleet 83% 80% 80% 81% 78%
  1. Rig utilization is defined as the total number of operating days divided by the total number of rig calendar days in the measurement period, expressed as a percentage. 


Revenue Efficiency(3)
Trailing Five Quarters and Historical Data
3Q 2013 2Q 2013 1Q 2013 4Q 2012 3Q 2012 FY 2012 FY 2011
Ultra-Deepwater 92.5% 91.1% 83.8% 95.5% 95.9% 93.2% 87.9%
Deepwater 91.1% 91.8% 86.4% 90.9% 96.1% 91.4% 90.7%
Harsh Environment Floaters 99.9% 98.3% 97.6% 97.3% 95.4% 97.1% 97.4%
Midwater Floaters 95.3% 94.5% 92.1% 93.9% 90.4% 90.9% 93.4%
High-Specification Jackups 98.9% 98.6% 96.4% 95.2% 97.2% 95.0% 94.8%
Total 94.0% 93.1% 88.0% 94.7% 94.9% 93.0% 90.5%
  1. Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. 


Transocean Ltd. and Subsidiaries
Supplemental Effective Tax Rate Analysis
(In US$ millions)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2013 2013 2012 2013 2012
Income from continuing operations before income taxes $ 607 $ 451 $ 638 $ 1,390 $ 508
     Add back (subtract):
          Litigation matters 29 - 8 103 758
          One-time termination benefits 16 10 - 26 -
          Acquisition costs - - - - 1
          Gain on disposal of assets, net (34 ) - (51 ) (34 ) (51 )
          Loss on financial instruments - 19 - 19 -
          (Gain) loss on retirement of debt - 1 (2 ) 2 (2 )
          Loss on impairment of goodwill and other assets - 37 - 37 140
          Loss on redeemed noncontrolling interest - - - - 25
Adjusted income from continuing operations before income taxes 618 518 593 1,543 1,379
Income tax expense from continuing operations 63 130 105 212 124
     Add back (subtract):
          Litigation matters 10 - 2 36 2
          One-time termination benefits 1 3 - 4 -
          Gain on disposal of assets, net (12 ) - (3 ) (12 ) (3 )
          Loss on impairment of goodwill and other assets - - - - 6
          Changes in estimates (1) 55 (11 ) (14 ) 77 154
          Other, net - - - - -
Adjusted income tax expense from continuing operations (2) $ 117 $ 122 $ 90 $ 317 $ 283
Effective Tax Rate (3) 10.4 % 28.8 % 16.5 % 15.3 % 24.4 %
Annual Effective Tax Rate (4) 19.0 % 23.5 % 15.2 % 20.6 % 20.5 %
  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 of allowances on deferred taxes and (c) other tax liabilities. 

  1. The three months and nine months ended September 30, 2013 includes ($9) 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. 

  1. Effective Tax Rate is income tax expense divided by income before income taxes. 

  1. 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. 


Transocean Ltd. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
Adjusted Net Income and Adjusted Diluted Earnings Per Share
(in US$ millions, except per share data)
YTD QTD YTD QTD QTD
09/30/13 09/30/13 06/30/13 06/30/13 03/31/13
Adjusted Net Income
Net income attributable to controlling interest, as reported $1,174 $546 $628 $307 $321
Add back (subtract):
Litigation matters                67                19                48                -                  48
One-time termination benefits                22                15                  7                  7                -  
Loss on impairment of assets                37                -                  37                37                -  
Gain on disposal of assets, net              (22)              (22)                -                  -                  -  
Loss on retirement of debt                  2                -                    2                  1                  1
Loss on financial instruments                19                -                  19                19                -  
Gain on disposal of assets in discontinued operations              (49)              (31)              (18)                (3)              (15)
Loss from discontinued operations                55                27                28                13                15
Discrete tax items and other, net              (77)              (55)              (22)                11              (33)
Net income, as adjusted $1,228 $499 $729 $392 $337
Adjusted Diluted Earnings Per Share:
Diluted earnings per share, as reported $3.23 $1.50 $1.73 $0.84 $0.88
Add back (subtract):
Litigation matters             0.19             0.05             0.13                -               0.15
One-time termination benefits             0.06             0.04             0.02             0.02                -  
Loss on impairment of assets             0.10                -               0.10             0.10                -  
Gain on disposal of assets, net           (0.06)           (0.06)
Loss on retirement of debt             0.01                -               0.01                -                  -  
Loss on financial instruments             0.05                -               0.05             0.05                -  
Gain on disposal of assets in discontinued operations           (0.14)           (0.09)           (0.05)           (0.01)           (0.05)
Loss from discontinued operations             0.15             0.07             0.08             0.04             0.05
Discrete tax items and other, net           (0.21)           (0.14)           (0.06)             0.04           (0.10)
Diluted earnings per share, as adjusted $3.38 $1.37 $2.01 $1.08 $0.93
YTD QTD YTD QTD YTD QTD QTD
12/31/12 12/31/12 09/30/12 09/30/12 06/30/12 06/30/12 03/31/12
Adjusted Net Income
Net income (loss) attributable to controlling interest, as reported ($219) $456 ($675) ($381) ($294) ($304) $10
Add back (subtract):
Litigation matters              756                -                756                  6              750                 750                -  
Loss on impairment of goodwill and other assets              135                -                135                -                135                   -                135
Gain on disposal of assets, net              (48)                -                (48)              (48)                -                     -                  -  
Gain on retirement of debt                (2)                -                  (2)                (2)                -                     -                  -  
Loss on redeemed noncontrolling interest                25                -                  25                -                  25                   14                11
Loss on impairment of assets in discontinued operations              961                  2              959              881                78                   12                66
(Gain) loss on disposal of assets in discontinued operations              (69)                (1)              (68)                  2              (70)                 (72)                  2
(Gain) loss from discontinued operations              135              (26)              161                33              128                   59                69
Discrete tax items and other, net            (255)            (101)            (154)                15            (169)               (141)              (28)
Net income, as adjusted $1,419 $330 $1,089 $506 $583 $318 $265
Adjusted Diluted Earnings Per Share:
Diluted earnings (loss) per share, as reported ($0.62) $1.26 ($1.90) ($1.06) ($0.84) ($0.86) $0.03
Add back (subtract):
Litigation matters             2.11                -               2.12             0.02             2.12                2.11                -  
Loss on impairment of goodwill and other assets             0.38                -               0.38                -               0.38                   -               0.38
Gain on disposal of assets, net           (0.13)                -             (0.13)           (0.13)                -                     -                  -  
Gain on retirement of debt           (0.01)                -             (0.01)           (0.01)                -                     -                  -  
Loss on redeemed noncontrolling interest             0.07                -               0.07                -               0.07                0.04             0.03
Loss on impairment of assets in discontinued operations             2.70                -               2.70             2.45             0.23                0.03             0.19
(Gain) loss on disposal of assets in discontinued operations           (0.19)                -             (0.19)             0.01           (0.20)              (0.20)             0.01
(Gain) loss from discontinued operations             0.38           (0.07)             0.45             0.09             0.36                0.17             0.19
Discrete tax items and other, net           (0.73)           (0.28)           (0.44)             0.03           (0.48)              (0.40)           (0.08)
Diluted earnings per share, as adjusted $3.96 $0.91 $3.05 $1.40 $1.64 $0.89 $0.75

HUG#1741272