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Transocean Inc. Reports Third Quarter 2002 Results

October 29, 2002
HOUSTON--(BUSINESS WIRE)--Oct. 29, 2002--Transocean Inc. (NYSE:RIG - News) today reported net income for the three months ended September 30, 2002 of $255.2 million, or $0.78 per diluted share, on revenues of $695.2 million. During the quarter, the company recognized a tax benefit totaling $176.2 million, or $0.53 per diluted share, attributable to the restructuring of certain non-U.S. operations, which utilized a previously unrecognized loss related to certain non-U.S. subsidiaries. Quarterly results also included a $26.6 million after-tax loss, or $0.08 per diluted share, resulting from the non-cash impairment of certain long lived assets previously classified as held for sale. Excluding the impact of the tax benefit and the non-cash loss due to the impairment of assets, net income for the three months ended September 30, 2002 was $105.6 million, or $0.33 per diluted share. The company's diluted weighted average share count during the quarter increased to 334.3 million shares from 323.9 million shares during the preceding quarter in 2002 due primarily to the dilutive effect of certain convertible debentures. For the corresponding three months in 2001, net income totaled $97.6 million, or $0.30 per diluted share, on revenues of $770.2 million. Results for the prior year quarter included a net after-tax gain of $7.5 million, or $0.02 per diluted share, resulting primarily from the sale of two Nigerian-based land rigs and the disposal of an inland drilling barge and goodwill amortization of $41.7 million, or $0.13 per diluted share. Excluding the net after-tax gain and goodwill amortization, net income for the three months ended September 30, 2001 was $131.8 million, or $0.41 per diluted share.

For the nine months ended September 30, 2002, the company reported a net loss of $951.2 million, or $2.88 per diluted share, on revenues of $2,009.3 million. Results for the first nine months of 2002 included the previously discussed tax benefit and non-cash loss on the impairment of long lived assets, in addition to a non-cash charge of $1,363.7 million, or $4.15 per diluted share, pertaining to the adoption in January 2002 of Statement of Financial Accounting Standards 142 (FAS 142), Goodwill and Other Intangible Assets. Excluding the impact of the tax benefit, loss from the non-cash impairment of assets and the non-cash charge related to FAS 142, net income for the nine months ended September 30, 2002 was $262.9 million, or $0.81 per diluted share. The company's effective tax rate would have been 13.9% without the effect of the tax benefit. For the corresponding nine months in 2001, net income was $196.6 million, or $0.63 per diluted share, on revenues of $2,072.5 million. The results included a net after-tax gain from the sale of assets totaling $23.5 million, or $0.07 per diluted share, offset by a $17.3 million, or $0.06 per diluted share, net after-tax extraordinary loss relating to the early retirement of certain debt and goodwill amortization of $113.4 million, $0.36 per diluted share. Adjusting for the net after-tax gain, extraordinary loss and goodwill amortization, net income for the nine months ended September 30, 2001 was $303.8 million, or $0.98 per diluted share.

Transocean Inc. completed a merger transaction with R&B Falcon Corporation on January 31, 2001. Consequently, operating results for the nine months ended September 30, 2001 reflect only eight months of operating results of R&B Falcon Corporation.

During the three months ended September 30, 2002, revenues from the company's International and U.S. Floater Contract Drilling Services segment improved 5% to $641.2 million compared to revenues of $609.1 million reported during the three months ended June 30, 2002. Operating income, before depreciation and general and administrative expenses, rose 9% to $315.5 million from $289.0 million during the preceding three month period.

Higher average utilization and dayrates during the three months ended September 30, 2002 produced a 46% improvement in revenues within the Gulf of Mexico Shallow and Inland Water segment to $54.0 million, compared to $37.1 million during the preceding quarter in 2002. Average utilization of 40% during the three months ended September 30, 2002, up from 27% during the preceding quarter, contributed to the segment's reduced operating loss of $1.4 million, compared to the $8.4 million operating loss for the quarter ended June 30, 2002.

The company's net debt declined further during the quarter, to $3,509 million at September 30, 2002, representing a reduction of $870 million and $647 million from net debt levels at September 30, 2001 and December 31, 2001, respectively.

The company also reported that it will conduct its annual test of goodwill impairment as of October 1, 2002, as prescribed by FAS 142. As a result of the decline in the company's stock price since January 1, 2002, when the initial test under FAS 142 was performed, the test on October 1, 2002 is expected to result in a non-cash impairment to goodwill representing a significant majority of the $5.1 billion at September 30, 2002. The impairment is expected to affect both of the company's reporting units.

Statements regarding the results of the company's annual test of goodwill impairment, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to the fair market value of the company's assets, the future price of oil and gas, demand for rigs, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, competition, risks of drilling, contract terminations or suspensions and other factors detailed in the company's most recent Form 10-K for the year ended December 31, 2001 and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.

Conference Call Information

The company will conduct a teleconference call at 10:00 a.m. ET on October 29, 2002. Individuals who wish to participate in the teleconference call may dial 719-457-2641 and refer to confirmation code 146882. It is recommended that participants dial in five to 10 minutes prior to the scheduled start time of the call.

In addition, the conference call will be simulcast through a listen-only broadcast over the Internet and can be accessed by logging onto the company's Worldwide Web address at www.deepwater.com and selecting "Investor Relations." It may also be accessed via the Worldwide Web at www.CompanyBoardroom.com by typing in the company's NYSE trading symbol, "RIG."

A telephonic replay of the conference call should be available after 1:00 p.m. ET on October 29 and can be accessed by dialing 719/457-0820 and referring to the passcode 146882. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Both replay options will be available for approximately 30 days.

Monthly Fleet Update Information

Drilling rig status and contract information on Transocean Inc.'s offshore drilling fleet has been condensed into two reports titled "Monthly Fleet Update" and "Monthly Fleet Update - Jackups and Barges," which are available through the company's Website at www.deepwater.com. The reports are located in the "Investor Relations/Financial Reports" section of the Website. By subscribing to the Transocean Financial Report Alert, you will be immediately notified when new postings are made to this page by an automated e-mail, which will provide a link directly to the page that has been updated. Shareholders and other interested parties are invited to sign up for this service.

Transocean Inc. is the world's largest offshore drilling contractor with more than 150 full or partially owned and managed mobile offshore drilling units, inland drilling barges and other assets utilized in the support of offshore drilling activities worldwide. The company's mobile offshore drilling fleet is considered one of the most modern and versatile in the world with 31 high-specification semisubmersibles and drillships, 27 other semisubmersibles and two drillships, and 54 jackup drilling rigs. Transocean Inc. specializes in technically demanding segments of the offshore drilling business, including industry-leading positions in deepwater and harsh environment drilling services. With a current equity market capitalization in excess of $6 billion, the company's ordinary shares are traded on the New York Stock Exchange under the symbol "RIG."


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

                                 Three Months Ended  Nine Months Ended
                                    September 30,      September 30,
                               ------------------ --------------------
                                    2002    2001       2002      2001
                                  -------  ------  ---------  --------
  Operating Revenues             $ 695.2  $770.2  $ 2,009.3  $2,072.5

  Costs and Expenses
    Operating and maintenance      381.1   418.2    1,127.7   1,163.5
    Depreciation                   124.2   125.4      374.1     348.3
    Goodwill amortization              -    41.7          -     113.4
    General and administrative      15.8    14.5       51.6      43.9
                                   521.1   599.8    1,553.4   1,669.1

  Impairment Loss on Long-Lived
   Assets                          (40.9)      -      (42.0)        -
  Gain from Sale of Assets, net      2.9     9.4        3.5      29.0
  Operating Income                 136.1   179.8      417.4     432.4

  Other Income (Expense), net
    Equity in earnings of joint
     ventures                        0.4     6.3        4.8      12.0
    Interest income                  6.1     5.5       16.0      13.7
    Interest expense, net of
     amounts capitalized           (52.3)  (60.8)    (160.7)   (164.8)
    Other, net                       1.3    (0.5)       0.2      (2.0)
                                   (44.5)  (49.5)    (139.7)   (141.1)

  Income Before Income Taxes,
   Minority Interest,
   Extraordinary Item and
   Cumulative Effect
   of a Change in Accounting
    Principle                       91.6   130.3      277.7     291.3

  Income Tax Expense (Benefit)    (164.8)   32.6     (137.1)     74.9
  Minority Interest                  1.2     0.1        2.3       2.5
  Net Income Before
   Extraordinary Item and
   Cumulative
   Effect of a Change in
    Accounting Principle           255.2    97.6      412.5     213.9

  Loss on Extraordinary Item,
   net of tax                          -       -          -     (17.3)
  Cumulative Effect of  a
   Change in Accounting
   Principle                           -       -   (1,363.7)        -
  Net Income (Loss)              $ 255.2  $ 97.6  $  (951.2) $  196.6

  Basic Earnings (Loss) Per Share
     Income Before
      Extraordinary Item and
      Cumulative Effect of
      a Change in Accounting
       Principle                 $  0.80  $ 0.31     $ 1.29  $   0.70
     Loss on Extraordinary
      Item, net of tax                 -       -          -     (0.06)
     Loss on Cumulative Effect
      of a Change in Accounting
      Principle                        -       -      (4.27)        -
     Net Income (Loss)           $  0.80  $ 0.31     $(2.98) $   0.64


  Diluted Earnings (Loss) Per Share
     Income Before
      Extraordinary Item and
      Cumulative Effect of
      a Change in Accounting
       Principle                 $  0.78  $ 0.30     $ 1.27  $   0.69
     Loss on Extraordinary
      Item, net of tax                 -       -          -     (0.06)
     Loss on Cumulative Effect
      of a Change in Accounting
      Principle                        -       -      (4.15)        -
     Net Income (Loss)           $  0.78  $ 0.30     $(2.88) $   0.63


  Weighted Average Shares
   Outstanding
    Basic                          319.2   318.7      319.1     305.2
    Diluted                        334.3   322.7      328.6     310.7

    On January 31, 2001, the company completed a merger transaction
with R&B Falcon Corporation. As a result of the merger, R&B Falcon
Corporation became an indirect wholly owned subsidiary of the company.
The company accounted for the merger using the purchase method of
accounting with the company treated as the accounting acquiror. The
above Consolidated Statement of Operations for the nine months ended
September 30, 2001 includes eight months of operating results of R&B
Falcon Corporation.

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

                                             September 30, December 31,
                                                    2002         2001
                                                ---------    ---------
                                              (Unaudited)
                                  ASSETS

Cash and Cash Equivalents                      $ 1,021.8    $   853.4
Accounts Receivable
   Trade                                           472.3        602.9
   Other                                            72.0         72.8
Materials and Supplies                             164.0        158.8
Deferred Income Taxes                               21.3         21.0
Other Current Assets                                32.5         27.9
   Total Current Assets                          1,783.9      1,736.8

Property and Equipment                          10,150.2     10,081.4
Less Accumulated Depreciation                    2,053.0      1,713.3
   Property and Equipment, net                   8,097.2      8,368.1

Goodwill, net                                    5,099.1      6,466.7
Investments in and Advances to Joint
 Ventures                                          107.0        107.1
Other Assets                                       422.9        341.1
     Total Assets                              $15,510.1    $17,019.8

    LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts Payable                               $   128.1    $   188.4
Accrued Income Taxes                                61.2        118.3
Debt Due Within One Year                           941.6        484.4
Other Current Liabilities                          280.9        283.4
     Total Current Liabilities                   1,411.8      1,074.5

Long-Term Debt                                   3,780.8      4,539.4
Deferred Income Taxes                              128.1        317.1
Other Long-Term Liabilities                        236.9        178.5
     Total Long-Term Liabilities                 4,145.8      5,035.0

Commitments and Contingencies

Preference Shares, $0.10 par value;
 50,000,000 shares authorized,
     none issued and outstanding                       -            -
Ordinary Shares, $0.01 par value;
 800,000,000 shares authorized,
     319,219,486 and 318,816,035 shares
      issued and outstanding at
     September 30, 2002 and December 31,
      2001, respectively                             3.2          3.2
Additional Paid-in Capital                      10,622.7     10,611.7
Accumulated Other Comprehensive Income              (0.7)        (2.3)
Retained Earnings (Deficit)                       (672.7)       297.7
     Total Shareholders' Equity                  9,952.5     10,910.3
     Total Liabilities and Shareholders'
      Equity                                   $15,510.1    $17,019.8


Consolidated Debt                              $ 4,722.4    $ 5,023.8
Less: Cash and Cash Equivalents                  1,021.8        853.4
Less: Swap Receivable                              191.8         15.1
Net Debt                                       $ 3,508.8    $ 4,155.3

Net Debt/Total Capital (excluding Goodwill,
 net)                                               42.0%        48.3%


                   TRANSOCEAN INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In millions)
                              (Unaudited)
                                                       Nine Months
                                                   Ended September 30,
                                                  --------------------
                                                      2002       2001
                                                   --------  ---------

   Cash Flows from Operating Activities
      Net income (loss)                           $ (951.2) $   196.6
      Adjustments to reconcile net income (loss)
       to net cash provided by operating activities
         Depreciation                                374.1      348.3
         Goodwill amortization                           -      113.4
         Cumulative effect of a change in
          accounting principle - goodwill
           impairment                              1,363.7          -
         Deferred income taxes                      (189.8)     (62.0)
         Equity in earnings of joint ventures         (4.8)     (12.0)
         Net (gain) loss from disposal of assets       1.2      (25.9)
         Impairment on long-lived assets              42.0          -
         Loss on sale of securities                      -        2.0
         Amortization of debt-related
          discounts/premiums, fair value
            adjustments and issue costs, net           4.6       (4.2)
         Deferred income, net                         (9.3)     (42.8)
         Deferred expenses, net                       (7.7)     (38.1)
         Extraordinary loss on debt
          extinguishment, net of tax                     -       17.3
         Other, net                                   11.9      (10.3)
         Changes in operating assets and
          liabilities, net of effects from the
            R&B Falcon merger
             Accounts receivable                     132.0     (103.5)
             Accounts payable and other current
              liabilities                            (41.9)     (78.7)
             Income taxes receivable/payable, net    (15.9)      75.4
             Other current assets                     (8.7)      (9.2)
   Net Cash Provided by Operating Activities         700.2      366.3

   Cash Flows from Investing Activities
     Capital expenditures                           (114.6)    (443.1)
     Proceeds from sale of securities                    -       17.2
     Proceeds from disposal of assets, net            73.6      108.4
     Merger costs paid                                   -      (24.4)
     Cash acquired in merger, net of cash paid           -      264.7
     Joint ventures and other investments, net         4.6       13.0
   Net Cash Used in Investing Activities             (36.4)     (64.2)

   Cash Flows from Financing Activities
   Net borrowings (repayments) on revolving
    credit agreements                                    -     (180.1)
   Net borrowings (repayments) under commercial
    paper program                                   (326.4)         -
   Net proceeds from issuance of other debt              -    1,693.5
   Repayments on other debt obligations             (154.3)  (1,500.1)
   Net proceeds from issuance of ordinary shares
    under stock-based compensation plans              10.2       29.5
   Proceeds from issuance of ordinary shares upon
    exercise of warrants                                 -       10.6
   Dividends paid                                    (19.1)     (28.6)
   Financing costs                                    (8.1)     (15.7)
   Other, net                                          2.3        5.3
   Net Cash Provided by (Used in) Financing
    Activities                                      (495.4)      14.4

   Net Increase in Cash and Cash Equivalents         168.4      316.5
   Cash and Cash Equivalents at Beginning of
    Period                                           853.4       34.5
   Cash and Cash Equivalents at End of Period     $1,021.8  $   351.0


                            Transocean Inc.
                      Fleet Operating Statistics

                              Operating Revenues ($ Millions)
                     -------------------------------------------------
                                                    Nine Months Ended
                          Three Months Ended          September 30,
                     ----------------------------- -------------------
International and
 U.S. Floater        Sept.      June       Sept.
 Contract Drilling     30,        30,        30,                2001
Services Segment:      2002      2002     2001 (2)    2002     (1)(2)
                      ------  --------  ---------- ---------  --------
      High-
       Specification
       Floaters      $326.4  $  335.1  $    341.5  $  971.4  $  935.3
      Other Floaters $157.8  $  143.2  $    160.6  $  465.2  $  444.2
      Jackups - Non-
       U.S.          $117.0  $  107.3  $     93.3  $  348.4  $  240.2
      Other          $ 40.0  $   23.5  $     46.1  $   88.5  $  168.6
Segment Total        $641.2  $  609.1  $    641.5  $1,873.5  $1,788.3

Gulf of Mexico Shallow and Inland Water Segment:
      Jackups and
       Submersibles  $ 21.7  $   17.3  $     59.6  $   52.3  $  228.8
      Inland Barges  $ 27.5  $   13.5  $     53.7  $   62.7  $  139.7
      Other          $  4.8  $    6.3  $     15.4  $   20.8  $   41.1
Segment Total        $ 54.0  $   37.1  $    128.7  $  135.8  $  409.6

Total Company        $695.2  $  646.2  $    770.2  $2,009.3  $2,197.9

                                      Average Dayrates (3)
                        ----------------------------------------------
                                                   Nine Months Ended
                             Three Months Ended      September 30,
                        --------------------------- ------------------
International and U.S.
  Floater Contract
   Drilling             Sept. 30, June 30, Sept. 30,
Services Segment:           2002     2002      2001     2002  2001 (1)
                         -------- --------  ------- -------- --------
      High-
       Specification
       Floaters         $144,600 $150,200  $144,800 $146,800 $143,800
      Other Floaters    $ 81,300 $ 76,800  $ 66,600 $ 78,500 $ 63,000
      Jackups - Non-
       U.S.             $ 60,400 $ 57,400  $ 49,200 $ 58,900 $ 44,000
      Other             $ 55,100 $ 43,700  $ 42,500 $ 47,300 $ 39,300
Segment Total           $ 95,500 $ 94,500  $ 86,700 $ 93,600 $ 82,400

Gulf of Mexico Shallow and Inland Water Segment:
      Jackups and
       Submersibles     $ 23,000 $ 21,000  $ 37,700 $ 22,100 $ 37,700
      Inland Barges     $ 20,700 $ 20,200  $ 24,400 $ 20,100 $ 22,300
Segment Total           $ 21,600 $ 20,700  $ 30,000 $ 20,900 $ 29,800

Total Mobile Offshore
 Drilling Fleet         $ 76,400 $ 80,500  $ 66,900 $ 77,700 $ 62,500

                                           Utilization (3)
                              ----------------------------------------
                                 Three Months Ended      Nine Months
                                                            Ended
                                                        September 30,
                              ------------------------ --------------
International and U.S.        Sept.   June       Sept.
 Floater Contract Drilling     30,      30,        30,
 Services Segment:            2002    2002        2001  2002  2001 (1)
                              ------------------------ --------------
      High-Specification
       Floaters                 85%     85%         87%   84%      86%
      Other Floaters            76%     73%         82%   77%      78%
      Jackups - Non-U.S.        84%     82%         84%   86%      83%
      Other                     51%     60%         48%   56%      51%
Segment Total                   79%     78%         81%   80%      79%

Gulf of Mexico Shallow and Inland Water Segment:
      Jackups and
       Submersibles             34%     29%         52%   28%      66%
      Inland Barges             47%     24%         75%   37%      71%
Segment Total                   40%     27%         63%   33%      68%

Total Mobile Offshore
 Drilling Fleet                 63%     57%         73%   61%      75%

(1) Transocean completed a merger transaction with R&B Falcon on
    January 31, 2001. Therefore, operating revenues, average dayrates
    and utilization for the nine months ended September 30, 2001 are
    stated as pro forma results based on the combined fleet of
    Transocean and R&B Falcon.

(2) Certain reclassifications have been made to prior periods to
    conform to current quarter presentation.

(3) Average dayrates and utilization for core assets only, defined as
    high-specification drillships and semisubmersibles ("floaters"),
    other floaters, jackup rigs, drilling barges, tenders and
    submersible drilling rigs.

Contact:
Transocean Inc., Houston
Analysts:
Jeffrey L. Chastain, 713/232-7551
or
Media:
Guy A. Cantwell, 713/232-7647

Source: Transocean Inc.