NYSE: RIG 10.31 0.48 4.45% 4:02 P.M. ET
Share Page Print Page
Back to all news articles

Transocean Ltd. Reports First Quarter 2017 Results

May 3, 2017
  • Revenues were $785 million compared with $974 million in the fourth quarter of 2016;
  • Operating and maintenance expense was $343 million, including $8 million in favorable items associated with litigation matters. This compares with $314 million in the prior period, including $30 million in favorable items associated with litigation matters;
  • Net income attributable to controlling interest was $91 million, $0.23 per diluted share, compared with $243 million, $0.64 per diluted share, in the fourth quarter of 2016;
  • Adjusted net income was $4 million, $0.01 per diluted share, excluding $87 million of net favorable items. This compares with $261 million, $0.69 per diluted share, in the prior quarter, excluding $18 million of net unfavorable items;
  • EBITDA margin was 52 percent, compared with 59 percent in the fourth quarter of 2016. Adjusted Normalized EBITDA margin was 48 percent, compared with 56 percent in the prior quarter;
  • Cash flows from operating activities were $184 million, compared with $633 million in the prior quarter;
  • Revenue efficiency(1) was 97.8 percent, compared with 100.3 percent in the fourth quarter of 2016; and
  • Contract backlog was $10.8 billion as of the April 2017 Fleet Status Report.

ZUG, SWITZERLAND-May 3, 2017-Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest of $91 million, $0.23 per diluted share, for the three months ended March 31, 2017.

First quarter 2017 results included net favorable items of $87 million, or $0.22 per diluted share as follows:

  • $77 million, $0.20 per diluted share, in discrete tax benefits;
  • $8 million, $0.02 per diluted share, related to favorable litigation matters; and
  • $2 million associated with gain on a rig disposal.

After consideration of these net favorable items, first quarter 2017 adjusted net income was $4 million, or $0.01 per diluted share.

Contract drilling revenues for the three months ended March 31, 2017, decreased $55 million sequentially to $738 million due primarily to reduced activity and lower revenue efficiency. These decreases were partially offset by higher dayrates on the ultra-deepwater drillship Deepwater Invictus while working in the U.S. Gulf of Mexico, and a full quarter's contribution from the company's newbuild drillship Deepwater Conqueror.

Other revenues decreased $134 million sequentially to $47 million due primarily to reduced early contract termination fees.

Operating and maintenance expense was $343 million, including $8 million in favorable items associated with litigation matters. This compares with $314 million in the prior quarter, including $30 million in favorable items associated with litigation matters. The increase was due primarily to the commencement of operations of the Deepwater Conqueror and a full quarter's activity on the Transocean Arctic.

General and administrative expense was $39 million, down from $47 million in the fourth quarter of 2016. The decrease was due primarily to lower restructuring costs.

The Effective Tax Rate(2) was (73.0) percent, down from (6.5) percent in the prior quarter. The decrease was due primarily to favorable items associated with litigation matters. The Effective Tax Rate excluding discrete items(3) was 82.1 percent, up from 3.3 percent in the previous quarter. The increase was due to reduced pre-tax income.

Interest expense, net of amounts capitalized, was $127 million, compared with $113 million in the prior quarter. Capitalized interest decreased $16 million sequentially to $30 million due primarily to the Deepwater Conqueror commencing operations. Interest income was $6 million, compared with $5 million in the prior quarter.

Cash flows from operating activities decreased $449 million sequentially to $184 million due to reduced operating activities.  Additionally, the prior quarter was favorably impacted by the collection of certain lump sum payments from customers.

First quarter 2017 capital expenditures of $122 million were primarily related to the company's contracted, newbuild drillships. This compares with $272 million in the previous quarter.

"I would like to recognize and thank the entire Transocean team for producing strong first quarter operating and financial results," said Jeremy Thigpen, President and Chief Executive Officer. "Our 98% revenue efficiency demonstrates our unwavering commitment to maximizing uptime for our customers. Our 48% Adjusted Normalized EBITDA Margin is the direct result of our ongoing efforts to optimize our business to enhance shareholder value. And, most importantly, our 12 months without a Lost Time Incident, proves our resolve to deliver incident free operations, all the time, everywhere."

Thigpen added, "This excellent and consistent performance, coupled with our industry-leading $10.8 billion backlog and solid liquidity, positions us well for a market recovery."

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 56 mobile offshore drilling units consisting of 30 ultra-deepwater floaters, seven harsh-environment floaters, three deepwater floaters, six midwater floaters and 10 high-specification jackups. In addition, the company has four 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, May 4, 2017, to discuss the results. To participate, dial +1 913-312-1522 and refer to confirmation code 8258213 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 at: www.deepwater.com, by selecting Investors, News, and Webcasts. Supplemental materials that may be referenced during the teleconference will be posted to Transocean's website and can be found by selecting Investors, Financial Reports.

A replay of the conference call will be available after 12 p.m. EDT, 6 p.m. CEST, on May 4, 2017. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 8258213 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 results of our final accounting for the periods presented in this press release 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, 2016, 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. 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."
  2. 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."
  3. Effective Tax Rate excluding discrete items 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."

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 STATEMENT OF OPERATIONS
(In millions, except share data)
(Unaudited)

               
    Three months ended   
    March 31,   
    2017   2016  
               
Operating revenues              
Contract drilling revenues   $  738   $  1,111  
Other revenues      47      230  
       785      1,341  
Costs and expenses              
Operating and maintenance      343      655  
Depreciation      232      217  
General and administrative      39      43  
       614      915  
Loss on impairment      -      (3)  
Gain on disposal of assets, net      2      1  
Operating income      173      424  
               
Other income (expense), net              
Interest income      6      6  
Interest expense, net of amounts capitalized      (127)      (89)  
Other, net      3      (1)  
       (118)      (84)  
Income from continuing operations before income tax expense      55      340  
Income tax expense (benefit)      (40)      98  
Income from continuing operations      95      242  
Loss from discontinued operations, net of tax      -      (1)  
               
Net income      95      241  
Net income attributable to noncontrolling interest      4      6  
Net income attributable to controlling interest   $  91   $  235  
               
Earnings per share-basic              
Earnings from continuing operations   $  0.23   $  0.64  
Earnings from discontinued operations      -      -  
Earnings per share   $  0.23   $  0.64  
               
Earnings per share-diluted              
Earnings from continuing operations   $  0.23   $  0.64  
Earnings from discontinued operations      -      -  
Earnings per share   $  0.23   $  0.64  
               
Weighted-average shares outstanding              
Basic      390      364  
Diluted      390      364  


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

               
    March 31,    December 31,   
    2017   2016  
               
Assets              
Cash and cash equivalents   $  3,093   $  3,052  
Accounts receivable, net of allowance for doubtful accounts
of less than $1 at March 31, 2017 and December 31, 2016
     850      898  
Materials and supplies, net of allowance for obsolescence
of $154 and $153 at March 31, 2017 and December 31, 2016, respectively
     553      561  
Restricted cash      442      466  
Other current assets      133      121  
Total current assets      5,071      5,098  
               
Property and equipment      27,459      27,372  
Less accumulated depreciation      (6,493)      (6,279)  
Property and equipment, net      20,966      21,093  
Deferred income taxes, net      309      298  
Other assets      371      400  
Total assets   $  26,717   $  26,889  
               
Liabilities and equity              
Accounts payable   $  162   $  206  
Accrued income taxes      76      95  
Debt due within one year      1,458      724  
Other current liabilities      851      960  
Total current liabilities      2,547      1,985  
               
Long-term debt      6,937      7,740  
Deferred income taxes, net      170      178  
Other long-term liabilities      1,128      1,153  
Total long-term liabilities      8,235      9,071  
               
Commitments and contingencies              
Redeemable noncontrolling interest      35      28  
               
Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at March 31, 2017 and December 31, 2016 and 390,930,439 and 389,366,241 outstanding at March 31, 2017 and December 31, 2016, respectively      37      36  
Additional paid-in capital      11,000      10,993  
Retained earnings      5,147      5,056  
Accumulated other comprehensive loss      (284)      (283)  
Total controlling interest shareholders' equity      15,900      15,802  
Noncontrolling interest      -      3  
Total equity      15,900      15,805  
Total liabilities and equity   $  26,717   $  26,889  


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

               
    Three months ended   
    March 31,   
    2017   2016  
Cash flows from operating activities              
Net income   $  95   $  241  
Adjustments to reconcile to net cash provided by operating activities:              
Depreciation      232      217  
Share-based compensation expense      10      13  
Loss on impairment      -      3  
Gain on disposal of assets, net      (2)      (1)  
Deferred income tax expense (benefit)      (19)      20  
Other, net      7      5  
Changes in deferred revenues, net      (68)      (25)  
Changes in deferred costs, net      16      35  
Changes in operating assets and liabilities      (87)      123  
Net cash provided by operating activities      184      631  
               
Cash flows from investing activities              
Capital expenditures      (122)      (368)  
Proceeds from disposal of assets, net      4      4  
Net cash used in investing activities      (118)      (364)  
               
Cash flows from financing activities              
Repayments of debt      (72)      (55)  
Deposits to cash accounts restricted for financing activities      -      (24)  
Proceeds from cash accounts and investments restricted for financing activities      50      49  
Distributions to holders of noncontrolling interest      -      (7)  
Other, net      (3)      5  
Net cash used in financing activities      (25)      (32)  
               
Net increase in cash and cash equivalents      41      235  
Cash and cash equivalents at beginning of period      3,052      2,339  
Cash and cash equivalents at end of period   $  3,093   $  2,574  


TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS

                     
    Operating Revenues (in millions)  
    Three months ended   
    March 31,    December 31,    March 31,   
    2017   2016   2016  
Contract drilling revenues                    
Ultra-deepwater floaters   $  505   $  560   $  621  
Harsh environment floaters      122      100      181  
Deepwater floaters      35      35      85  
Midwater floaters      13      30      138  
High-specification jackups      63      66      82  
Contract intangible revenue      -      2      4  
Total contract drilling revenues      738      793      1,111  
                     
Other revenues                    
Customer early termination fees      37      169      209  
Customer reimbursement revenues and other      10      12      21  
Total other revenues      47      181      230  
Total revenues   $  785   $  974   $  1,341  

                     
    Average Daily Revenue (1)  
    Three months ended   
    March 31,    December 31,    March 31,   
    2017   2016   2016  
Ultra-deepwater floaters   $  519,900   $  490,600   $  490,300  
Harsh environment floaters      276,700      253,500      548,600  
Deepwater floaters      192,000      204,500      310,000  
Midwater floaters      92,300      128,600      361,400  
High-specification jackups      141,200      143,500      150,200  
Total drilling fleet   $  337,700      329,400   $  395,400  

                       
      Utilization (2)  
      Three months ended   
      March 31,    December 31,    March 31,   
      2017   2016   2016  
Ultra-deepwater floaters      36    43    50  
Harsh environment floaters      70    61    52  
Deepwater floaters      67    53    60  
Midwater floaters      27    37    39  
High-specification jackups      50    50    60  
Total drilling fleet      43    46    51  

                                 
      Revenue Efficiency (3)
      Three months ended    Years ended
      March 31,    December 31,    March 31,    December 31,    December 31, 
      2017   2016   2016   2016   2015
Ultra-deepwater floaters      97.8    100.1    94.3    97.8    95.1 %
Harsh environment floaters      97.0    97.1    98.6    97.8    98.1 %
Deepwater floaters      92.6    93.4    97.4    96.3    97.4 %
Midwater floaters      91.3    94.7    97.6    99.0    95.2 %
High-specification jackups      104.1    115.0    86.7    97.6    99.2 %
Total drilling fleet      97.8    100.3    95.0    97.8    96.0 %

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.

2. 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.

3. 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
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER
SHARE
(in US$ millions, except per share data) 
                                                                                                                                                                                                                                                                                                                                              

                                 
                      YTD    
                      03/31/17    
Adjusted Net Income                                  
Net income attributable to controlling interest, as reported                           $  91    
Add back (subtract):                                  
Litigation matters                              (8)    
Gain on disposal of assets, net                              (2)    
Discrete tax items and other, net                              (77)    
Net income, as adjusted                           $  4    
                                   
Adjusted Diluted Earnings Per Share:                                  
Diluted earnings per share, as reported                           $  0.23    
Add back (subtract):                                  
Litigation matters                              (0.02)    
Gain on disposal of assets, net                              -    
Discrete tax items and other, net                              (0.20)    
Diluted earnings per share, as adjusted                           $  0.01    

                                           
  YTD   QTD   YTD   QTD   YTD   QTD   QTD  
  12/31/16   12/31/16   09/30/16   09/30/16   06/30/16   06/30/16   03/31/16  
Adjusted Net Income                                          
Net income attributable to controlling interest, as reported $  778   $  243   $  535   $  218   $  317   $  82   $  235  
Add back (subtract):                                          
Litigation matters    (28)      (28)      -      -      -      -      -  
Restructuring charges    26      11      15      4      11      7      4  
Loss on impairment of assets    91      66      25      11      14      12      2  
Gain on disposal of assets, net    (13)      (5)      (8)      (3)      (5)      (4)      (1)  
Gain on retirement of debt    (148)      -      (148)      (110)      (38)      (38)      -  
(Income) loss from discontinued operations    -      -      -      -      -      (1)      1  
Discrete tax items and other, net    (50)      (26)      (24)      (32)      8      7      1  
Net income, as adjusted $  656   $  261   $  395   $  88   $  307   $  65   $  242  
                                           
Adjusted Diluted Earnings Per Share:                                          
Diluted earnings per share, as reported $  2.08   $  0.64   $  1.44   $  0.59   $  0.86   $  0.22   $  0.64  
Add back (subtract):                                          
Litigation matters    (0.08)      (0.07)      -      -      -      -      -  
Restructuring charges    0.07      0.03      0.04      0.01      0.03      0.02      0.01  
Loss on impairment of assets    0.25      0.16      0.06      0.03      0.04      0.03      -  
Gain on disposal of assets, net    (0.04)      (0.01)      (0.02)      (0.01)      (0.01)      (0.01)      -  
Gain on retirement of debt    (0.40)      -      (0.40)      (0.30)      (0.11)      (0.11)      -  
(Income) loss from discontinued operations    -      -      -      -      -      -      -  
Discrete tax items and other, net    (0.12)      (0.06)      (0.06)      (0.08)      0.02      0.02      -  
Diluted earnings per share, as adjusted $  1.76   $  0.69   $  1.06   $  0.24   $  0.83   $  0.17   $  0.65  


TRANSOCEAN LTD. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
EARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION AND RELATED MARGINS
(in US$ millions, except percentages)

                                           
                            QTD
                            03/31/17
                                           
Operating  revenues                                       $  785
Drilling contract termination fees                                          (37)
Adjusted Normalized Revenues                                       $  748
                                           
Net income                                       $  95
Interest expense, net of amounts capitalized                                          121
Income tax expense (benefit)                                          (40)
Depreciation expense                                          232
EBITDA                                          408
                                           
Litigation matters                                          (8)
Gain on disposal of assets, net                                          (2)
Adjusted EBITDA                                          398
                                           
Drilling contract termination fees                                          (37)
Adjusted Normalized EBITDA                                       $  361
                                           
EBITDA margin                                         52%
Adjusted EBITDA margin                                         51%
Adjusted Normalized EBITDA margin                                         48%

                                           
    YTD   QTD   YTD   QTD   YTD   QTD   QTD
    12/31/16   12/31/16   09/30/16   09/30/16   06/30/16   06/30/16   03/31/16
                                           
Operating  revenues   $  4,161   $  974   $  3,187   $  906   $  2,281   $  940   $  1,341
Drilling contract termination fees      (396)      (169)      (227)      (9)      (218)      (9)      (209)
Adjusted Normalized Revenues   $  3,765   $  805   $  2,960   $  897   $  2,063   $  931   $  1,132
                                           
Net income   $  827   $  257   $  570   $  236   $  334   $  93   $  241
Interest expense, net of amounts capitalized      389      108      281      104      177      94      83
Income tax expense (benefit)      107      (15)      122      6      116      18      98
Depreciation expense      893      226      667      225      442      225      217
EBITDA      2,216      576      1,640      571      1,069      430      639
                                           
Restructuring charges      28      11      17      4      13      8      5
Litigation matters      (30)      (30)      -      -      -      -      -
Loss on impairment of assets      93      67      26      11      15      12      3
Gain on disposal of assets, net      (13)      (5)      (8)      (3)      (5)      (4)      (1)
Gain on retirement of debt      (148)      -      (148)      (110)      (38)      (38)      -
(Income) loss from discontinued operations, net of tax      -      -      -      -      -      (1)      1
Adjusted EBITDA      2,146      619      1,527      473      1,054      407      647
                                           
Drilling contract termination fees      (396)      (169)      (227)      (9)      (218)      (9)      (209)
Adjusted Normalized EBITDA   $  1,750   $  450   $  1,300   $  464   $  836   $  398   $  438
                                           
EBITDA margin     53%     59%     51%     63%     47%     46%     48%
Adjusted EBITDA margin     52%     64%     48%     52%     46%     43%     48%
Adjusted Normalized EBITDA margin     46%     56%     44%     52%     41%     43%     39%


TRANSOCEAN LTD. AND SUBSIDIARIES
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS
(In US$ millions, except tax rates)

                     
    Three months ended   
    March 31,    December 31,    March 31,   
    2017   2016   2016  
Income from continuing operations before income taxes   $  55   $  242   $  340  
Add back (subtract):                    
Litigation matters      (8)      (30)      -  
Restructuring charges      -      11      5  
Loss on impairment of assets      -      67      3  
Gain on disposal of assets, net      (2)      (5)      (1)  
Gain on retirement of debt      -      -      -  
Adjusted income from continuing operations before income taxes      45      285      347  
                     
Income tax expense (benefit) from continuing operations      (40)      (15)      98  
Add back (subtract):                    
Litigation matters      -      (2)      -  
Restructuring charges      -      -      1  
Loss on impairment of assets      -      1      1  
Gain on disposal of assets, net      -      -      -  
Changes in estimates (1)      77      26      (1)  
Adjusted income tax expense from continuing operations   $  37   $  10   $  99  
                     
Effective Tax Rate (2)      (73.0)    (6.5)    29.1
                     
Effective Tax Rate, excluding discrete items (3)      82.1    3.3    28.6
  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.
  2. Our effective tax rate is calculated as income tax expense for continuing operations divided by income from continuing operations before income taxes.
  3. Our effective tax rate, excluding discrete items, is calculated as 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.