NYSE: RIG 4.2 0.34 8.81% 6:30 P.M. ET
Share Page Print Page
Back to all news articles

Transocean Inc. Reports Second Quarter 2008 Financial Results

August 6, 2008

HOUSTON--(BUSINESS WIRE)--Aug. 6, 2008--Transocean Inc. (NYSE:RIG)today reported net income for the three months ended June 30, 2008 of$1.107 billion, or $3.45 per diluted share, compared to net income of$549 million, or $2.63 per diluted share for the three months endedJune 30, 2007. Revenues for the second quarter of 2008 were $3.102billion compared to $1.434 billion for the second quarter of 2007.

For the six months ended June 30, 2008, net income totaled $2.296billion, or $7.15 per diluted share, on revenues of $6.212 billion.For the same period last year, net income totaled $1.102 billion, or$5.24 per diluted share, on revenues of $2.762 billion. Net income forthe first half of 2008 included after-tax charges of $31 million, or$0.10 per diluted share, resulting primarily from $25 million ofdiscrete tax items, $3 million of merger-related costs and a $3million loss from the early retirement of debt. For the same periodlast year, net income included after-tax gains of $33 million, or$0.15 per diluted share, resulting primarily from a $20 million gainon the sale of the tender rig Charley Graves and $13 million ofdiscrete tax items during the first quarter 2007.

On November 27, 2007, Transocean Inc. merged with GlobalSantaFeCorporation and reclassified its ordinary shares into cash and shares(the \"Reclassification\"). Reported results for the second quarter andfirst half of 2008 include a full three and six months, respectively,from GlobalSantaFe's operations. Diluted earnings per share for thesecond quarter and first half of 2007 exclude GlobalSantaFe'soperations and are based on a weighted average diluted share count of210 million and 211 million shares, respectively, which includes theeffect of restating the historical diluted share count for theReclassification.

Operations Quarterly Review

Revenues for the three months ended June 30, 2008 were $3.102billion compared to revenues of $3.110 billion during the three monthsended March 31, 2008. The $8 million quarter-to-quarter decrease intotal revenues included $53 million of lower contract drillingrevenues reflecting an increase in out-of-service time for plannedshipyards, which were partially offset by an increase in averagedayrates, and $34 million of lower non-cash contract drillingintangible revenues. These net declines were offset by a $79 millionincrease in other revenues, primarily from non-drilling activities.The average dayrate for the fleet increased four percent from $229,000in the first quarter to $238,600 in the second quarter, primarily as aresult of rigs commencing new contracts at higher dayrates in thesecond quarter.

Operating and maintenance expenses for the three months ended June30, 2008 were $1.364 billion compared to $1.157 billion for the priorthree-month period. The $207 million increase in operating andmaintenance expenses primarily reflects an increase in shipyard andmaintenance projects as previously anticipated and scheduled payincreases.

Depreciation, depletion and amortization totaled $337 million inthe second quarter of 2008, a decline of 8.2 percent compared to $367million in the first quarter of 2008. The quarter-to-quarter decreasein depreciation, depletion and amortization is related to recentlysold rigs and rigs classified as held for sale.

General and administrative expenses decreased 8.2 percent to $45million in the second quarter of 2008 compared to $49 million in theprior three-month period. The decrease primarily reflects a reductionin merger-related compensation costs relative to the first quarter of2008.

Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the secondquarter of 2008 decreased to $111 million compared to $137 million forthe first quarter of 2008. The decrease resulted primarily from aquarter-to-quarter reduction in total debt of approximately $1.316billion. As of June 30, 2008, total debt was $15.279 billion comparedto $16.6 billion as of March 31, 2008.

Cash flow from operating activities totaled $1.011 billion for thesecond quarter of 2008 compared to $1.482 billion for the firstquarter of 2008. Lower quarter-to-quarter cash flow during the secondquarter of 2008 primarily reflects an increase in working capital anddeferred expenses, as well as lower net income.

Effective Tax Rate

The Annual Effective Tax Rate(1) for the second quarter and firsthalf of 2008 was 11.4 percent and 12.5 percent, respectively. TheEffective Tax Rate(2) for the first half of 2008 was 13.5 percent,which reflects the impact of various discrete tax items totaling $25million, primarily related to changes in estimates. The Effective TaxRate(2) for the second quarter of 2008 was 11.2 percent.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m.Eastern Time on August 6, 2008. To participate, dial 913-312-1439 andrefer to confirmation code 2830174 approximately five to 10 minutesprior to the scheduled start time of the call.

In addition, the conference call will be simultaneously broadcastover the Internet in a listen-only mode and can be accessed by loggingonto the company's website at www.deepwater.com and selecting\"Investor Relations/News & Events/Webcasts & Presentations.\" A filecontaining four charts to be discussed during the conference call,titled \"2Q08 Charts,\" has been posted to the company's website and canalso be found by selecting \"Investor Relations/News & Events/Webcasts& Presentations.\" The conference call may also be accessed via theInternet at www.CompanyBoardroom.com by typing in the company's NewYork Stock Exchange trading symbol, \"RIG.\"

A telephonic replay of the conference call should be availableafter 1:00 p.m. Eastern Time on August 6, 2008 and can be accessed bydialing 719-457-0820 and referring to the passcode 2830174. Also, areplay will be available through the Internet and can be accessed byvisiting either of the above-referenced Worldwide Web addresses.

Transocean Inc. is the world's largest offshore drillingcontractor and the leading provider of drilling management servicesworldwide. With a fleet of 137 mobile offshore drilling units plus 10announced ultra-deepwater newbuild units, the company's fleet isconsidered one of the most modern and versatile in the world due toits emphasis on technically demanding segments of the offshoredrilling business. The company owns or operates a contract drillingfleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwaterand Harsh-Environment semisubmersibles and drillships), 29 MidwaterFloaters, 10 High-Specification Jackups, 55 Standard Jackups and otherassets utilized in the support of offshore drilling activitiesworldwide.

(1) Annual Effective Tax Rate is defined as income tax expenseexcluding various discrete items (such as changes in estimates and taxon items excluded from income before income taxes) divided by incomebefore income taxes excluding gains on sales and similar itemspursuant to Financial Accounting Standards Board Interpretation No.18. See the accompanying schedule entitled \"Supplemental Effective TaxRate Analysis.\"

(2) Effective Tax Rate is defined as income tax expense divided byincome before income taxes. See the accompanying schedule entitled\"Supplemental Effective Tax Rate Analysis.\"

                   TRANSOCEAN INC. AND SUBSIDIARIES           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                 (In millions, except per share data)                             (Unaudited)                            Three months ended     Six months ended                                  June 30,              June 30,                           ---------------------  --------------------                              2008       2007       2008       2007                           ----------  ---------  ---------  ---------Operating revenues  Contract drilling   revenues                 $  2,587    $ 1,360    $ 5,227    $ 2,633  Contract drilling   intangible revenues           190         --        414         --  Other revenues                 325         74        571        129----------------------------------------------------------------------                               3,102      1,434      6,212      2,762----------------------------------------------------------------------Costs and expenses  Operating and   maintenance                 1,364        627      2,521      1,195  Depreciation, depletion   and amortization              337        101        704        201  General and   administrative                 45         29         94         55----------------------------------------------------------------------                               1,746        757      3,319      1,451----------------------------------------------------------------------Gain (loss) from disposal of assets, net                   (6)        (1)        (3)        22----------------------------------------------------------------------Operating income               1,350        676      2,890      1,333----------------------------------------------------------------------Other income (expense), net  Interest income                 10          5         23         10  Interest expense, net of   amounts capitalized          (111)       (33)      (248)       (70)  Other, net                      (3)        (5)       (11)         8----------------------------------------------------------------------                                (104)       (33)      (236)       (52)----------------------------------------------------------------------Income before income taxes and minority interest         1,246        643      2,654      1,281Income tax expense               140         93        358        178Minority interest                 (1)         1         --          1----------------------------------------------------------------------Net income                  $  1,107    $   549    $ 2,296    $ 1,102======================================================================Earnings per share  Basic                     $   3.48    $  2.73    $  7.22    $  5.45  Diluted                   $   3.45    $  2.63    $  7.15    $  5.24======================================================================Weighted average shares outstanding  Basic                          318        202        318        202  Diluted                        321        210        321        211======================================================================
                   TRANSOCEAN INC. AND SUBSIDIARIES                CONDENSED CONSOLIDATED BALANCE SHEETS                   (In millions, except share data)                                            June 30,     December 31,                                              2008           2007                                         --------------  -------------                                          (Unaudited)                 ASSETSCash and cash equivalents                 $        976    $     1,241Accounts receivable, net of allowance for doubtful accounts of $62 and $50 at June 30, 2008 and December 31, 2007, respectively                                    2,478          2,370Materials and supplies, net of allowance for obsolescence of $23 and $22 at June 30, 2008 and December 31, 2007, respectively                                      414            333Deferred income taxes, net                          84            119Assets held for sale                               567             --Other current assets                               212            233----------------------------------------------------------------------     Total current assets                        4,731          4,296----------------------------------------------------------------------Property and equipment                          24,661         24,545Less accumulated depreciation                    4,277          3,615----------------------------------------------------------------------     Property and equipment, net                20,384         20,930----------------------------------------------------------------------Goodwill                                         8,351          8,219Other assets                                     1,011            919----------------------------------------------------------------------     Total assets                         $     34,477    $    34,364======================================================================  LIABILITIES AND SHAREHOLDERS' EQUITYAccounts payable                          $        861    $       805Accrued income taxes                               182             99Debt due within one year                         2,145          6,172Other current liabilities                          732            826----------------------------------------------------------------------     Total current liabilities                   3,920          7,902----------------------------------------------------------------------Long-term debt                                  13,134         11,085Deferred income taxes, net                         734            681Other long-term liabilities                      1,719          2,125----------------------------------------------------------------------     Total long-term liabilities                15,587         13,891----------------------------------------------------------------------Commitments and contingenciesMinority interest                                    5              5Preference 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, 319,044,814 and 317,222,909 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively                 3              3Additional paid-in capital                      10,907         10,799Accumulated other comprehensive loss               (47)           (42)Retained earnings                                4,102          1,806----------------------------------------------------------------------     Total shareholders' equity                 14,965         12,566----------------------------------------------------------------------     Total liabilities and shareholders'      equity                              $     34,477    $    34,364======================================================================
                   TRANSOCEAN INC. AND SUBSIDIARIES           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                            (In millions)                             (Unaudited)                                 Three months ended  Six months ended                                      June 30,           June 30,                                 ------------------  -----------------                                   2008      2007      2008     2007                                 --------  --------  --------  -------Cash flows from operating activities  Net income                     $ 1,107   $   549   $ 2,296   $1,102  Adjustments to reconcile net   income to net cash provided   by operating activities:    Amortization of drilling     contract intangibles           (190)       --      (414)      --    Depreciation, depletion and     amortization                    337       101       704      201    Share-based compensation     expense                          11         9        33       19    (Gain) loss from disposal of     assets, net                       6         1         3      (22)    Deferred revenue, net              7         4        25       38    Deferred expenses, net          (145)       (6)     (129)     (13)    Deferred income taxes            (31)       (5)      (56)      (7)    Other, net                        (6)        5       (18)       4  Changes in operating assets   and liabilities                   (85)      (51)       49      (61)----------------------------------------------------------------------Net cash provided by operating activities                        1,011       607     2,493    1,261----------------------------------------------------------------------Cash flows from investing activities    Capital expenditures            (420)     (290)   (1,189)    (755)    Proceeds from disposal of     assets, net                      93         2       347       41    Joint ventures and other     investments, net                 --        --        (3)      (3)----------------------------------------------------------------------Net cash used in investing activities                         (327)     (288)     (845)    (717)----------------------------------------------------------------------Cash flows from financing activities    Borrowings (repayments)     under commercial paper     program, net                   (171)       --     1,145       --    Repayments under revolving     credit facilities, net         (180)     (190)   (1,500)      --    Proceeds from debt                75        --     2,051       --    Repayments of debt            (1,040)     (230)   (3,673)    (230)    Payments made upon exercise     of warrants, net                 --        --        (4)      --    Proceeds from issuance of     ordinary shares under     share-based compensation     plans, net                       34        40        61       55    Repurchase of ordinary     shares                           --        --        --     (400)    Tax benefit from issuance of     ordinary shares under     share-based compensation     plans                             8         4        11        9    Other, net                        (1)       --        (4)      ------------------------------------------------------------------------Net cash used in financing activities                       (1,275)     (376)   (1,913)    (566)----------------------------------------------------------------------Net decrease in cash and cash equivalents                        (591)      (57)     (265)     (22)Cash and cash equivalents at beginning of period               1,567       502     1,241      467----------------------------------------------------------------------Cash and cash equivalents at end of period                       $   976   $   445   $   976   $  445======================================================================
                           Transocean Inc.                      Fleet Operating Statistics                            Operating Revenues ($ Millions) (1)                     -------------------------------------------------                                                    Six months ended                          Three months ended            June 30,                     ----------------------------- -------------------                     June 30,  March 31, June 30,                       2008      2008      2007      2008      2007                     --------- --------- --------- --------- ---------Contract Drilling Revenues  High-Specification   Floaters:    Ultra Deepwater     Floaters        $    558  $    608  $    336  $  1,166  $    676    Deepwater     Floaters             377       325       256       702       498    Harsh Environment     Floaters             168       150       126       318       236  Total High-   Specification   Floaters             1,103     1,083       718     2,186     1,410  Midwater Floaters       650       675       396     1,325       768  High-Specification   Jackups                147       157        12       304        24  Standard Jackups        674       711       218     1,385       401  Other Rigs               13        14        16        27        30Subtotal                2,587     2,640     1,360     5,227     2,633Contract Intangible Revenue                  190       224         0       414         0Other Revenues  Client Reimbursable   Revenues                51        47        29        98        59  Integrated Services   and Other               48       (52)       45        (4)       70  Drilling Management   Services               208       227         0       435         0  Oil and Gas   Properties              18        24         0        42         0Subtotal                  325       246        74       571       129Total Company        $  3,102  $  3,110  $  1,434  $  6,212  $  2,762                                   Average Dayrates (1)                     -------------------------------------------------                                                    Six months ended                          Three months ended            June 30,                     ----------------------------- -------------------                     June 30,  March 31, June 30,                       2008      2008      2007      2008      2007                     --------- --------- --------- --------- ---------  High-Specification   Floaters:    Ultra Deepwater     Floaters        $390,400  $380,800  $288,900  $385,300  $295,100    Deepwater     Floaters        $317,400  $284,100  $212,600  $301,100  $215,800    Harsh Environment     Floaters        $379,400  $344,000  $288,500  $361,900  $267,300  Total High-   Specification   Floaters          $360,500  $340,900  $256,100  $350,500  $257,200  Midwater Floaters  $299,300  $292,300  $234,400  $295,700  $233,300  High-Specification   Jackups           $178,000  $173,800  $130,400  $175,800  $131,900  Standard Jackups   $149,400  $146,200  $117,300  $147,700  $110,400  Other Rigs         $ 48,400  $ 49,700  $ 57,200  $ 49,000  $ 53,700Total Drilling Fleet $238,600  $229,000  $202,400  $233,700  $200,200                                      Utilization (1)                     -------------------------------------------------                                                    Six months ended                          Three months ended            June 30,                     ----------------------------- -------------------                     June 30,  March 31, June 30,                       2008      2008      2007      2008      2007                     --------- --------- --------- --------- ---------  High-Specification   Floaters:    Ultra Deepwater     Floaters              87%       98%       98%       92%       97%    Deepwater     Floaters              81%       79%       83%       80%       80%    Harsh Environment     Floaters              98%       96%       96%       97%       98%  Total High-   Specification   Floaters                86%       90%       91%       88%       89%  Midwater Floaters        82%       88%       98%       85%       96%  High-Specification   Jackups                 91%       99%      100%       95%      100%  Standard Jackups         89%       93%       85%       91%       84%  Other Rigs              100%      100%      100%      100%      100%Total Drilling Fleet       87%       91%       91%       89%       90%
(1) Average daily revenue is defined as contract drilling revenue     earned per revenue earning day in the period. A revenue earning     day is defined as a day for which a rig earns dayrate after     commencement of operations. Utilization is defined as the total     actual number of revenue earning days in the period as a     percentage of the total number of calendar days in the period for     all drilling rigs in our fleet.
                   Transocean Inc. and Subsidiaries           Non-GAAP Financial Measures and Reconciliations      Operating Income Before General and Administrative Expense                      to Field Operating Income                            (in millions)                             Three months ended      Six months ended                         --------------------------- -----------------                         June 30, March 31, June 30, June 30, June 30,                           2008     2008      2007     2008     2007                         -------- --------- -------- -------- --------  Operating revenue      $  3,102 $  3,110  $  1,434 $  6,212 $ 2,762  Operating and   maintenance expense      1,364    1,157       627    2,521   1,195  Depreciation,   depletion and   amortization               337      367       101      704     201  (Gain) loss from   disposal of assets,   net                          6       (3)        1        3     (22)                         -------- --------- -------- -------- --------Operating income before general and administrative expense     1,395    1,589       705    2,984   1,388Add back (subtract):       Depreciation,        depletion and        amortization          337      367       101      704     201       (Gain) loss from        disposal of        assets, net             6       (3)        1        3     (22)                         -------- --------- -------- -------- --------Field operating income   $  1,738 $  1,953  $    807 $  3,691 $ 1,567                         ======== ========= ======== ======== ========
                  Transocean Inc. and Subsidiaries              Supplemental Effective Tax Rate Analysis                            (In millions)                          Three months ended       Six months ended                      ---------------------------  -----------------                      June 30, March 31, June 30,  June 30, June 30,                        2008     2008      2007      2008     2007                      ---------------------------  -----------------Income (Loss) before income taxes and minority interest    $ 1,246  $  1,408  $   643   $ 2,654  $ 1,281  Add back   (subtract):    (Gain) loss on     disposal of     assets, net            -         -        1         -      (22)    Income from TODCO     tax sharing     agreement              -         -        -         -        -        Loss on         retirement         of debt            1         2        -         3        -        GSF Merger         related         costs              3         1        -         4        -                      ---------------------------  -----------------Adjusted income before income taxes    1,250     1,411      644     2,661    1,259Income tax expense        140       218       93       358      178  Add back   (subtract):    (Gain) loss on     disposal of     assets, net            -         -        -         -       (3)        GSF Merger         related         costs              -         -        -                  -    Changes in     estimates (1)          2       (27)      11       (25)      13                      ---------------------------  -----------------Adjusted income tax expense (2)          $   142  $    191  $   104   $   333  $   188                      ===========================  =================Effective Tax Rate (3)                     11.2%     15.5%    14.4%     13.5%    13.9%Annual Effective Tax Rate (4)                11.4%     13.5%    16.1%     12.5%    14.9%                                                Years ended Dec. 31,                                                ---------------------                                                   2007       2006                                                ---------------------Income (Loss) before income taxes and minority interest                                       $   3,384  $   1,607  Add back (subtract):    (Gain) loss on disposal of assets, net           (264)      (410)    Income from TODCO tax sharing agreement          (277)       (51)        Loss on retirement of debt                      8          -        GSF Merger related costs                       82          -                                                ---------------------Adjusted income before income taxes                 2,933      1,146Income tax expense                                    253        222  Add back (subtract):    (Gain) loss on disposal of assets, net             (3)       (24)        GSF Merger related costs                       15          -    Changes in estimates (1)                          101         14                                                ---------------------Adjusted income tax expense (2)                 $     366  $     212                                                =====================Effective Tax Rate (3)                                7.5%      13.8%Annual Effective Tax Rate (4)                        12.5%      18.5%(1) Our estimates change as we file tax returns, settle disputes with     tax authorities or become aware of other events and include     changes in deferred taxes valuation allowances on deferred taxes     and other tax liabilities.(2) The three months ended June 30, 2008 include $ (30) million of     additional tax expense (benefit) reflecting the catch-up effect     of an increase (decrease) in the annual effective tax rate from     the previous quarter estimate.(3) Effective Tax Rate is income tax expense divided by income before     income taxes.(4) Annual Effective Tax Rate is income tax expense excluding various     discrete items (such as changes in estimates and tax on items     excluded from income before income taxes) divided by income     before income taxes excluding gains on sales and similar items     pursuant to Financial Accounting Standards Board Interpretation     No. 18.

CONTACT: Transocean Inc., Houston
Analyst Contact:
Gregory S. Panagos, 713-232-7551
or
Media Contact:
Guy A. Cantwell, 713-232-7647

SOURCE: Transocean Inc.