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Transocean Ltd. Reports Second Quarter 2016 Results

August 3, 2016
  • Contract drilling revenues were $918 million, compared to $1.11 billion in the first quarter of 2016; Other revenues were $25 million, compared with $230 million in the prior quarter;
  • Operating and maintenance expense was $500 million, down from $665 million in the prior period;
  • Net income attributable to controlling interest was $77 million, $0.21 per diluted share, compared with $249 million, $0.68 per diluted share, in the first quarter of 2016;
  • Adjusted net income was $64 million, $0.17 per diluted share, excluding $13 million of net favorable items. This compares with $254 million, $0.69 per diluted share, in the prior quarter, excluding $5 million of net unfavorable items;
  • The Annual Effective Tax Rate(1) was 16.3 percent, compared with 22.8 percent in the first quarter of 2016;
  • Cash flows from operating activities were $207 million, compared with $631 million in the previous quarter;
  • Revenue efficiency(2) was 96.5 percent, up from 95.0 percent in the first quarter of 2016; and
  • Contract backlog was $13.7 billion as of the July 2016 Fleet Status Report.

ZUG, SWITZERLAND-August 3, 2016-Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest of $77 million, $0.21 per diluted share, for the three months ended June 30, 2016. Second quarter 2016 results included net favorable items of $13 million, $0.04 per diluted share, as follows:

  • $38 million, $0.10 per diluted share, in net gains on early debt retirements; and
  • $5 million, $0.01 per diluted share, associated with gains on rig disposals and discontinued operations.

These net favorable items were partially offset by:

  • $18 million, $0.04 per diluted share, related to the loss on impairment of assets;
  • $7 million, $0.02 per diluted share, in restructuring costs including employee severance; and
  • $5 million, $0.01 per diluted share, in discrete tax expense.

After consideration of these net favorable items, second quarter 2016 adjusted net income was $64 million, or $0.17 per diluted share.

For the three months ended June 30, 2015, the company reported a net income attributable to controlling interest of $342 million, or $0.93 per diluted share. The second quarter of 2015 included net unfavorable items of $66 million, $0.18 per diluted share, associated with losses on the impairment of the midwater floater asset group and other assets classified as held for sale, partially offset by Macondo-related settlements and insurance recoveries. After consideration of these net unfavorable items, adjusted net income was $408 million, or $1.11 per diluted share.

Contract drilling revenues for the three months ended June 30, 2016, decreased $193 million sequentially to $918 million due primarily to lower rig utilization(3) and dayrates. The decrease was partially offset by contributions from the newbuild, ultra-deepwater drillships Deepwater Proteus and Deepwater Thalassa and the reactivated harsh-environment floater Henry Goodrich, and higher revenue efficiency.

Other revenues decreased $205 million sequentially to $25 million due primarily to significant first quarter 2016 early contract termination fees.

Operating and maintenance expense was $500 million, down from $665 million in the previous quarter. The decrease was due largely to reduced activity and lower stacking costs. The quarter was also favorably impacted by a decline in reactivation costs associated with the Henry Goodrich, and lower shore-based expenses.

General and administrative expense was $42 million, down from $43 million in the first quarter of 2016.

Depreciation expense was $225 million, compared with $217 million in the previous quarter. The increase was primarily associated with the commencement of operations of the newbuild drillships.

The Effective Tax Rate(4) was 16.2 percent, down from 22.4 percent in the first quarter of 2016. The Annual Effective Tax Rate was 16.3 percent, down from 22.8 percent in the previous quarter. The decrease was due largely to changes in adjusted pre-tax income and the mix of operating results from certain jurisdictions. As a result, income tax expense included a benefit of $22 million, $0.06 per diluted share, to reflect the decrease in the Annual Effective Tax Rate to 21.5 percent for the six months ended June 30, 2016, from 22.8 percent in the previous quarter.

Interest expense, net of amounts capitalized, was $95 million, compared with $89 million in the prior quarter. Capitalized interest decreased $9 million sequentially to $40 million due primarily to the commencement of operations of the newbuild drillships. Interest income was $4 million, compared with $6 million in the prior quarter.

Cash flows from operating activities were $207 million, compared with $631 million in the prior quarter. The decline was largely related to early contract termination fees that primarily impacted the first quarter of 2016.

Capital expenditures totaled $458 million, up from $368 million in the prior quarter. The increase was primarily associated with the company's newbuild program. Capital expenditures in the second quarter of 2016 included shipyard payments primarily on the contracted newbuild, ultra-deepwater drillships Deepwater Pontus and Deepwater Conqueror.

"I am very pleased with the company's second quarter operating and financial results," said President and Chief Executive Officer Jeremy Thigpen. "Thanks to the continued focus and commitment of the entire Transocean team, we delivered excellent safety and uptime performance for our customers, resulting in 96.5 percent quarterly revenue efficiency. We also continued to improve our cost structure through the streamlining of both our organization and our processes." 

"In addition to the strong operating results, we further strengthened our balance sheet, and enhanced our liquidity position, by closing a $1.25 billion note offering and simultaneous tender to repurchase debt," said Executive Vice President and Chief Financial Officer Mark Mey. "We also announced the merger agreement to acquire the remaining interest in Transocean Partners which will improve our liquidity position going forward."

Additionally, Thigpen said, "though we continue to face market headwinds, the combination of our industry-leading backlog, exceptional operating performance, and solid financial position ensures that we will maintain our position as the industry's leading deepwater driller."

Non-GAAP Financial Measures

All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at: www.deepwater.com.

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 60 mobile offshore drilling units consisting of 29 ultra-deepwater floaters, seven harsh-environment floaters, four deepwater floaters, 10 midwater floaters and 10 high-specification jackups. In addition, the company has five ultra-deepwater drillships and five high-specification jackups under construction or under contract to be constructed.

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

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EDT, 3 p.m. CEST, on Thursday, August 4, 2016, to discuss the results. To participate, dial +1 913-981-5519 and refer to confirmation code 3940977 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode over the Internet and can be accessed on Transocean's website, www.deepwater.com, by selecting "Investor Relations/Overview." Supplemental materials that may be referenced during the teleconference will be posted to Transocean's website and can be found by selecting "Investor Relations/Financial Reports."

A replay of the conference call will be available after 12 p.m. EDT, 6 p.m. CEST, on August 4, 2016. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 3940977, and PIN 9876. The replay will also be available on the company's website.

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements contain words such as "possible," "intend," "will," "if," "expect," or other similar expressions. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, estimated duration of customer contracts, contract dayrate amounts, future contract commencement dates and locations, planned shipyard projects and other out-of-service time, sales of drilling units, timing of the company's newbuild deliveries, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, the future prices of oil and gas, the intention to scrap certain drilling rigs, the benefits, effects or results of the anticipated merger with Transocean Partners LLC, the failure to obtain Transocean Partners LLC unitholder approval for the merger and the satisfaction of other conditions to the consummation of the merger and other factors, including those and other risks discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2015, 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 to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law. All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at: www.deepwater.com.

This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations. Investors must rely on their own evaluation of Transocean 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.

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 taxes), divided by income from continuing operations before income tax expense excluding gains and losses 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) 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 for continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

Analyst Contacts:
Bradley Alexander
+1 713-232-7515

Diane Vento
+1 713-232-8015

Media Contact:
Pam Easton
+1 713-232-7647


TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)

                           
    Three months ended    Six months ended  
    June 30,    June 30,   
    2016   2015   2016   2015  
                           
Operating revenues                          
Contract drilling revenues   $  918   $  1,777   $  2,029   $  3,777  
Other revenues      25      107      255      150  
       943      1,884      2,284      3,927  
Costs and expenses                          
Operating and maintenance      500      197      1,165      1,281  
Depreciation      225      249      442      540  
General and administrative      42      44      85      90  
       767      490      1,692      1,911  
Loss on impairment      (20)      (890)      (23)      (1,826)  
Gain (loss) on disposal of assets, net      (2)      2      (1)      (5)  
Operating income      154      506      568      185  
                           
Other income (expense), net                          
Interest income      4      6      10      12  
Interest expense, net of amounts capitalized      (95)      (120)      (184)      (236)  
Gain on retirement of debt      38      -      38      -  
Other, net      3      (5)      2      42  
       (50)      (119)      (134)      (182)  
Income from continuing operations before income tax expense      104      387      434      3  
Income tax expense      17      40      91      123  
Income (loss) from continuing operations      87      347      343      (120)  
Income (loss) from discontinued operations, net of tax      1      1      -      (1)  
                           
Net income (loss)      88      348      343      (121)  
Net income attributable to noncontrolling interest      11      6      17      20  
Net income (loss) attributable to controlling interest   $  77   $  342   $  326   $  (141)  
                           
Earnings (loss) per share-basic                          
Earnings (loss) from continuing operations   $  0.21   $  0.93   $  0.88   $  (0.39)  
Earnings (loss) from discontinued operations      -      -      -      -  
Earnings (loss) per share   $  0.21   $  0.93   $  0.88   $  (0.39)  
                           
Earnings (loss) per share-diluted                          
Earnings (loss) from continuing operations   $  0.21   $  0.93   $  0.88   $  (0.39)  
Earnings (loss) from discontinued operations      -      -      -      -  
Earnings (loss) per share   $  0.21   $  0.93   $  0.88   $  (0.39)  
                           
Weighted-average shares outstanding                          
Basic     365     363     365     363  
Diluted     365     363     365     363  


TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)

               
    June 30,    December 31,   
    2016   2015  
               
Assets              
Cash and cash equivalents   $  2,153   $  2,339  
Accounts receivable, net of allowance for doubtful accounts
of less than $1 at June 30, 2016 and December 31, 2015
     936      1,379  
Materials and supplies, net of allowance for obsolescence
of $159 and $148 at June 30, 2016 and December 31, 2015, respectively
     597      635  
Assets held for sale      2      8  
Restricted cash      360      340  
Other current assets      81      84  
Total current assets      4,129      4,785  
               
Property and equipment      26,977      26,274  
Less accumulated depreciation      (5,888)      (5,456)  
Property and equipment, net      21,089      20,818  
Deferred income taxes, net      256      316  
Other assets      365      410  
Total assets   $  25,839   $  26,329  
               
Liabilities and equity              
Accounts payable   $  279   $  448  
Accrued income taxes      57      82  
Debt due within one year      1,063      1,093  
Other current liabilities      800      1,046  
Total current liabilities      2,199      2,669  
               
Long-term debt      7,155      7,397  
Deferred income taxes, net      300      339  
Other long-term liabilities      1,027      1,108  
Total long-term liabilities      8,482      8,844  
               
Commitments and contingencies              
Redeemable noncontrolling interest      18      8  
               
Shares, CHF 0.10 par value, 393,397,220 authorized, 167,617,649 conditionally authorized, 370,967,382 issued and 365,389,695 outstanding at June 30, 2016 and CHF 15.00 par value, 396,260,487 authorized, 167,617,649 conditionally authorized, 373,830,649 issued and 364,035,397 outstanding at December 31, 2015      34      5,193  
Additional paid-in capital      10,680      5,739  
Treasury shares, at cost, 2,863,267 held at December 31, 2015     -      (240)  
Retained earnings      4,466      4,140  
Accumulated other comprehensive loss      (343)      (334)  
Total controlling interest shareholders' equity      14,837      14,498  
Noncontrolling interest      303      310  
Total equity      15,140      14,808  
Total liabilities and equity   $  25,839   $  26,329  

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

             
  Six months ended  
  June 30,   
  2016   2015  
             
Cash flows from operating activities            
Net income (loss) $  343   $  (121)  
Adjustments to reconcile to net cash provided by operating activities:            
Depreciation    442      540  
Share-based compensation expense    26      33  
Loss on impairment    23      1,826  
Loss on disposal of assets, net    1      5  
Gain on retirement of debt    (38)      -  
Deferred income tax expense (benefit)    14      (90)  
Other, net    7      21  
Changes in deferred revenues, net    (28)      (107)  
Changes in deferred costs, net    54      116  
Changes in operating assets and liabilities    (6)      (386)  
Net cash provided by operating activities    838      1,837  
             
Cash flows from investing activities            
Capital expenditures    (826)      (396)  
Proceeds from disposal of assets, net    15      33  
Proceeds from repayment of loans receivable    -      15  
Net cash used in investing activities    (811)      (348)  
             
Cash flows from financing activities            
Repayments of debt    (251)      (69)  
Deposit to cash account restricted for financing activities    (24)      -  
Proceeds from cash investments restricted for financing activities    73      57  
Distributions of qualifying additional paid-in capital    -      (327)  
Distributions to holders of noncontrolling interest    (16)      (14)  
Other, net    5      (2)  
Net cash used in financing activities    (213)      (355)  
             
Net increase (decrease) in cash and cash equivalents    (186)      1,134  
Cash and cash equivalents at beginning of period    2,339      2,635  
Cash and cash equivalents at end of period $  2,153   $  3,769  


TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS

  Operating Revenues (in millions)
  Three months ended     Six months ended
  June 30,
2016
    March 31,
2016
    June 30,
2015
    June 30,
2016
    June 30,
2015
Contract drilling revenues                                    
  Ultra-Deepwater Floaters $ 556     $ 621     $ 853     $ 1,177     $ 1,785
   Harsh Environment Floaters   100       181       241       281       502
  Deepwater Floaters   51       85       162       136       381
  Midwater Floaters   133       138       381       271       810
  High-Specification Jackups   74       82       136       157       291
Contract intangible revenue   4       4       4       7       8
Total contract drilling revenues   918       1,111       1,777       2,029       3,777
                                     
Other revenues                                    
  Customer early termination fees   9       209       66       218       66
  Customer reimbursement revenues and other   16       21       41       37       84
Total other revenues   25       230       107       255       150
Total revenues   943       1,341       1,884       2,284       3,927
                                     
                                     
  Average Daily Revenue (1)
  Three months ended     Six months ended
  June 30,
2016
    March 31,
2016
    June 30,
2015
    June 30,
2016
    June 30,
2015
  Ultra-Deepwater Floaters $ 503,000     $ 490,300     $ 531,400     $ 496,200     $ 532,900
  Harsh Environment Floaters   343,500       548,600       513,300       452,500       522,600
  Deepwater Floaters   238,600       310,000       364,000       278,600       351,100
  Midwater Floaters   304,600       361,400       338,800       331,200       341,200
  High-Specification Jackups   137,900       150,200       172,100       144,100       173,300
Total Drilling Fleet $ 353,700       395,400     $ 399,700     $ 375,400     $ 398,800
                                     
  1. Average daily revenue is defined as contract drilling revenues 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     Six months ended
  June 30,
2016
    March 31,
2016
    June 30,
2015
    June 30,
2016
    June 30,
2015
  Ultra-Deepwater Floaters 43%     50%     65%     46%     66%
  Harsh Environment Floaters 46%     52%     74%     49%     76%
  Deepwater Floaters 52%     60%     71%     56%     79%
  Midwater Floaters 48%     39%     89%     43%     87%
  High-Specification Jackups 59%     60%     87%     60%     93%
Total Drilling Fleet 47%     51%     75%     49%     77%
                                     
  1. Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed as a percentage.

    Revenue Efficiency (3)
    Three months ended     Six months ended  
    June 30,
2016
    March 31,
2016
    June 30,
2015
    June 30,
2016
    June 30,
2015
 
       Ultra-Deepwater Floaters 97.2%     94.3%     97.0%     95.6%     97.1%  
      Harsh Environment Floaters 98.3%     98.6%     98.4%     98.5%     97.5%  
      Deepwater Floaters 96.9%     97.4%     100.3%     97.2%     97.7%  
      Midwater Floaters 98.6%     97.6%     95.3%     98.1%     93.2%  
      High-Specification Jackups 86.8%     86.7%     98.6%     86.7%     99.0%  
    Total Drilling Fleet 96.5%     95.0%     97.2%     95.7%     96.5%  
  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, except tax rates)  
   
                 
                 
  Three months ended     Six months ended  
  June 30,     March 31,     June 30,     June 30,     June 30,  
  2016     2016     2015     2016     2015  
Income from continuing operations before income taxes $ 104     $ 330     $ 387     $ 434     $ 3  
  Add back (subtract):                                      
  Litigation matters   -       -       (788 )     -       (788 )
  Restructuring charges   8       5       12       13       17  
  Loss on impairment of goodwill and other assets   20       3       890       23       1,826  
  Gain on disposal of other assets, net   (4 )     (1 )     (3 )     (5 )     (5 )
  Gain on retirement of debt   (38 )     -       -       (38 )     -  
Adjusted income from continuing operations before income taxes   90       337       498       427       1,053  
                                       
Income tax expense from continuing operations   17       74       40       91       123  
  Add back (subtract):                                      
  Litigation matters   -       -       (53 )     -       (53 )
  Restructuring charges   1       1       1       2       1  
  Loss on impairment of goodwill and other assets   2       1       93       3       155  
  Loss on disposal of other assets, net   -       -       2       -       1  
  Changes in estimates (1)   (5 )     1       1       (4 )     -  
Adjusted income tax expense from continuing operations (2) $ 15     $ 77     $ 84     $ 92     $ 227  
                                       
Effective Tax Rate (3)   16.2 %     22.4 %     10.3 %     21.0 %     4100 %
                                       
Annual Effective Tax Rate (4)   16.3 %     22.8 %     16.9 %     21.5 %     21.6 %
                                       
  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 six months ended June 30, 2016 includes $(22) 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 for continuing operations, divided by income from continuing operations before income taxes.
  1. Annual Effective Tax Rate is income tax expense for continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income from continuing operations before income tax expense 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  
Adjusted Net Income                             06/30/16     06/30/16     03/31/16  
Net income (loss) attributable to controlling interest, as reported                           $ 326   $ 77   $ 249  
  Add back (subtract):                                            
  Restructuring charges                             11     7      
  Loss on impairment of assets                             20     18     2  
  Gain on disposal of assets, net                             (5 )   (4 )   (1 )
  Gain on retirement of debt                             (38 )   (38 )   -  
  (Income) loss from discontinued operations                             -     (1 )   1  
  Discrete tax items and other, net                             4     5     (1 )
Net income, as adjusted                           $ 318   $ 64   $ 254  
                                               
Adjusted Diluted Earnings Per Share                                            
Diluted earnings (loss) per share, as reported                           $ 0.88   $ 0.21   $ 0.68  
  Add back (subtract):                                            
  Restructuring charges                             0.03     0.02     0.01  
  Loss on impairment of assets                             0.05     0.04     -  
  Gain on disposal of assets, net                             (0.01 )   (0.01 )   -  
  Gain on retirement of debt                             (0.10 )   (0.10 )   -  
  (Income) loss from discontinued operations                             -     -     -  
  Discrete tax items and other, net                             0.01     0.01     -  
Diluted earnings per share, as adjusted                           $ 0.86   $ 0.17   $ 0.69  

      YTD     QTD     YTD     QTD     YTD     QTD     QTD  
Adjusted Net Income     12/31/15     12/31/15     09/30/15     09/30/15     06/30/15     06/30/15     03/31/15  
Net income (loss) attributable to controlling interest, as reported   $ 791   $ 611   $ 180   $ 321   $ (141 ) $ 342   $ (483 )
  Add back (subtract):                                            
  Litigation matters     (735 )   -     (735 )   -     (735 )   (735 )   -  
  Restructuring charges     40     22     18     2     16     11     5  
  Loss on impairment of assets     1,713     29     1,684     13     1,671     797     874  
  Gain on disposal of assets, net     (12 )   (5 )   (7 )   (1 )   (6 )   (5 )   (1 )
  Gain on retirement of debt     (23 )   (16 )   (7 )   (7 )   -     -     -  
  Gain on disposal of assets in discontinued operations     (1 )   -     (1 )   (1 )   -     -     -  
  (Income) loss from discontinued operations     (1 )   1     (2 )   (3 )   1     (1 )   2  
  Discrete tax items and other, net     (35 )   (27 )   (8 )   (8 )   -     (1 )   1  
Net income, as adjusted   $ 1,737   $ 615   $ 1,122   $ 316   $ 806   $ 408   $ 398  
                                               
Adjusted Diluted Earnings Per Share                                            
Diluted earnings (loss) per share, as reported   $ 2.16   $ 1.66   $ 0.49   $ 0.88   $ (0.39 ) $ 0.93   $ (1.33 )
  Add back (subtract):                                            
  Litigation matters     (2.02 )   -     (2.02 )   -     (2.02 )   (2.02 )   -  
  Restructuring charges     0.11     0.06     0.04     -     0.04     0.03     0.01  
  Loss on impairment of assets     4.67     0.08     4.61     0.03     4.60     2.18     2.41  
  Gain on disposal of assets, net     (0.02 )   (0.01 )   (0.02 )   -     (0.02 )   (0.01 )   -  
  Gain on retirement of debt     (0.06 )   (0.04 )   (0.02 )   (0.02 )   -     -     -  
  Gain on disposal of assets in discontinued operations     -     -     -     -     -     -     -  
  (Income) loss from discontinued operations     -     -     -     -     -     -     0.01  
  Discrete tax items and other, net     (0.10 )   (0.07 )   (0.02 )   (0.02 )   -     -     -  
Diluted earnings per share, as adjusted   $ 4.74   $ 1.68   $ 3.06   $ 0.87   $ 2.21   $ 1.11   $ 1.10  

HUG#2033048