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Transocean Ltd. Reports Fourth Quarter, Full Year 2017 Results

February 20, 2018
  • Contract drilling revenues were $589 million, compared with $699 million in the third quarter of 2017;
  • Other revenues were $40 million, compared with $109 million in the previous quarter;
  • Revenue efficiency(1) was 92.4 percent, compared with 97.1 percent in the prior quarter;
  • Operating and maintenance expense was $389 million, compared with $323 million in the previous quarter;
  • Net loss attributable to controlling interest was $111 million, $0.28 per diluted share, compared with net loss attributable to controlling interest of $1.42 billion, $3.62 per diluted share, in the third quarter of 2017;
  • Adjusted net loss was $93 million, $0.24 per diluted share, excluding $18 million of net unfavorable items. This compares with adjusted net income of $64 million, $0.16 per diluted share, in the prior quarter, excluding $1.48 billion of net unfavorable items primarily related to the retirement of six floaters;
  • Cash flows from operating activities were $257 million, down from $384 million in the prior quarter; and
  • Contract backlog was $12.8 billion as of the February 2018 Fleet Status Report.

STEINHAUSEN, Switzerland, Feb. 20, 2018 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE:RIG) today reported net loss attributable to controlling interest of $111 million, $0.28 per diluted share, for the three months ended December 31, 2017.

Fourth quarter 2017 results included net unfavorable items of $18 million, $0.04 per diluted share, as follows:

  • $20 million, $0.04 per diluted share, in discrete tax expense; and
  • $6 million, $0.01 per diluted share, loss on the early retirement of debt.

These net unfavorable items were partially offset by:

  • $6 million, $0.01 per diluted share, gain on disposal of assets; and
  • $2 million associated with other favorable items.

After consideration of these net unfavorable items, fourth quarter 2017 adjusted net loss was $93 million, or $0.24 per diluted share.

Contract drilling revenues for the three months ended December 31, 2017, decreased $110 million sequentially to $589 million. The decline was primarily due to fewer operating days and lower revenue efficiency. The lower revenue efficiency was primarily driven by the Petrobras 10000, which is returning to work in the first quarter of 2018. The quarter results were also impacted by lower dayrates on the Deepwater Invictus. These decreases were partly offset by the commencement of operations of the ultra-deepwater newbuild drillship Deepwater Pontus.

Other revenues were $40 million, which included $25 million of early termination fees associated with the Discoverer Clear Leader. This compares with $109 million in the prior quarter, which included $99 million of early termination fees.

Operating and maintenance expense was $389 million, compared with $323 million in the prior quarter. The anticipated sequential increase was the result of the reactivation and contract preparation costs related to the Development Driller I and Deepwater Nautilus; and the commencement of operations of the Deepwater Pontus. The quarter results were also impacted by timing from the prior quarter of scheduled maintenance costs and recycling costs associated with previously announced floater retirements.

General and administrative expense was $43 million compared with $39 million in the third quarter of 2017. The sequential increase was primarily due to anticipated IT system enhancements and other corporate costs.

Depreciation expense was $184 million, down from $197 million in the third quarter of 2017. The decrease was primarily due to the previously announced floater retirements.

Interest expense, net of amounts capitalized, was $123 million, compared with $112 million in the prior quarter. The increase in interest expense was largely due to the senior unsecured notes issued during the fourth quarter of 2017, partly offset by the company's early debt retirements. Capitalized interest decreased $6 million sequentially to $25 million primarily due to the commencement of operations of the Deepwater Pontus. Interest income was $9 million, compared with $21 million in the prior quarter, which included interest associated with an award on a customer-terminated drilling contract in 2015.

The Effective Tax Rate(2) was 8.3 percent, up from (14.7) percent in the prior quarter. In the fourth quarter of 2017, income tax expense included a $66 million charge associated with the re-measurement of deferred tax assets and liabilities related to the recent Tax Cuts and Jobs Act (\"U.S. Tax Reform\"). Offsetting this charge was a decrease in the U.S. valuation allowance totaling $31 million. The U.S. Tax Reform also includes a one-time tax on unrepatriated earnings of non-U.S. subsidiaries. Due to the complexities associated with the repatriation tax analysis, the company has elected to defer estimating this amount until 2018. The Effective Tax Rate excluding discrete items(3) was  25.4 percent, compared with 56.5 percent in the previous quarter.

Cash flows from operating activities decreased $127 million sequentially to $257 million primarily due to an award in the prior quarter that was not repeated in the fourth quarter of 2017.

Fourth quarter 2017 capital expenditures of $111 million were primarily related to the newbuilds, Deepwater Poseidon and Deepwater Pontus, including milestone shipyard payments. This compares with $128 million in the previous quarter.

\"Despite challenging market conditions, Transocean made great progress in 2017,\" said President and Chief Executive Officer Jeremy Thigpen. \"Just recently, we upgraded our fleet with the newbuild additions of the Deepwater Pontus and Deepwater Poseidon, both of which are backed by ten-year contracts. We announced the acquisition of Songa Offshore, adding seven semisubmersibles to our fleet, including four harsh environment high-specification floaters with $3.7 billion of backlog. We divested our jackup fleet; and, we retired another nine assets, including five older, less competitive ultra-deepwater rigs.\"

Thigpen added: \"In addition to enhancing our fleet, we continued to operate at a high level for our customers, delivering full year 2017 revenue efficiency of just over 96%. This consistently strong performance helped us to secure 25 new floater awards throughout the year, adding almost $900 million to our industry-leading backlog.\"

\"As we enter 2018, our ongoing balance sheet management has provided us the means to continue carrying out our strategic objectives, while extending our liquidity runway,\" said Thigpen. \"We are encouraged by the upward momentum we continue to see in oil prices, and the resulting increase in demand for our assets and services. In the harsh environment market, we are experiencing strong demand for high-specification semisubmersibles, resulting in a meaningful year-over-year improvement in dayrates. While demand in ultra-deepwater is not as strong, we are encouraged to see customers seeking multi-year fixtures for assets in various basins around the world.\"

Full Year 2017

For the year ended December 31, 2017, net loss attributable to controlling interest totaled $3.13 billion, or $8.00 per diluted share. Full year results included $3.10 billion, $7.94 per diluted share, of net unfavorable items as follows:

  • $1.59 billion, $4.07 per diluted share, loss on divestiture of the jackup fleet and three midwater floaters;
  • $1.50 billion, $3.84 per diluted share, loss on impairment associated with the retirement of six floaters and the midwater floater asset group; and
  • $55 million, $0.14 per diluted share, loss related to the early retirement of debt.

These net unfavorable items were partially offset by:

  • $37 million, $0.10 per diluted share, in discrete tax benefits; and
  • $2 million, $0.01 per diluted share, in favorable litigation matters and other costs.

After excluding these net unfavorable items, adjusted net loss for 2017 was $24 million, or $0.06 per diluted share.

Non-GAAP Financial Measures

We present our operating results in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). We believe certain financial measures, such as Adjusted Net Income, EBITDA, Adjusted EBITDA and Adjusted Normalized EBITDA, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under U.S. GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. Such non-GAAP measures should be considered as a supplement to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP.

All non-GAAP measure reconciliations to the most comparative U.S. GAAP measures 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 ultra-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 47 mobile offshore drilling units consisting of 27 ultra-deepwater floaters, 12 harsh environment floaters, two deepwater floaters and six midwater floaters. In addition, the company has two ultra-deepwater drillships under construction or under contract to be constructed. We also continue to operate two high-specification jackups that were under drilling contracts when we sold the rigs, and we continue to operate these jackups until completion or novation of the drilling contracts.

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

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EST, 3 p.m. CET, on Wednesday, February 21, 2018, to discuss the results. To participate, dial +1 719-325-2494 and refer to conference code 4018515 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode at: www.deepwater.com, by selecting Investors, News, and Webcasts. Supplemental materials that may be referenced during the teleconference will be available at: www.deepwater.com, by selecting Investors, Financial Reports.

A replay of the conference call will be available after 12 p.m. EST, 6 p.m. CET, on February 21, 2018. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 4018515 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, the expected benefits from the acquisition of Songa Offshore SE (\"Songa\"), the ability to successfully integrate the Transocean and Songa businesses 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 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. 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
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share data)
(Unaudited)


  Years ended December 31, 
  2017  2016  2015 
          
Operating revenues         
Contract drilling revenues $ 2,731  $ 3,705  $ 6,802 
Other revenues    242    456    584 
    2,973    4,161    7,386 
Costs and expenses         
Operating and maintenance   1,388    1,875    2,955 
Depreciation   832    893    963 
General and administrative   156    172    192 
    2,376    2,940    4,110 
Loss on impairment   (1,498)   (93)   (1,875)
Gain (loss) on disposal of assets, net   (1,603)   4    (36)
Operating income (loss)   (2,504)   1,132    1,365 
          
Other income (expense), net         
Interest income   43    20    22 
Interest expense, net of amounts capitalized   (491)   (409)   (432)
Gain (loss) on retirement of debt   (55)   148    23 
Other, net   4    43    37 
    (499)   (198)   (350)
Income (loss) from continuing operations before income tax expense   (3,003)   934    1,015 
Income tax expense   94    107    120 
Income (loss) from continuing operations   (3,097)   827    895 
Income (loss) from discontinued operations, net of tax   —    —    2 
          
Net income (loss)   (3,097)   827    897 
Net income attributable to noncontrolling interest   30    49    32 
Net income (loss) attributable to controlling interest $ (3,127) $ 778  $ 865 
          
Earnings (loss) per share—basic         
Earnings (loss) from continuing operations $ (8.00) $ 2.08  $ 2.36 
Earnings (loss) from discontinued operations   —    —    — 
Earnings (loss) per share $ (8.00) $ 2.08  $ 2.36 
          
Earnings (loss) per share—diluted         
Earnings (loss) from continuing operations $ (8.00) $ 2.08  $ 2.36 
Earnings (loss) from discontinued operations   —    —    — 
Earnings (loss) per share $ (8.00) $ 2.08  $ 2.36 
          
Weighted-average shares outstanding          
Basic   391    367    363 
Diluted   391    367    363 



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


  December 31, 
  2017  2016 
       
Assets      
Cash and cash equivalents $ 2,519  $ 3,052 
Short-term investments   450    — 
Accounts receivable, net      
Trade   597    833 
Other   44    65 
Materials and supplies, net   418    561 
Restricted cash accounts and investments   466    466 
Other current assets   112    121 
Total current assets   4,606    5,098 
       
Property and equipment   22,693    27,372 
Less accumulated depreciation   (5,291)   (6,279)
Property and equipment, net   17,402    21,093 
Deferred income taxes, net   47    298 
Other assets   355    400 
Total assets $ 22,410  $ 26,889 
       
Liabilities and equity      
Accounts payable $ 201  $ 206 
Accrued income taxes   79    95 
Debt due within one year   250    724 
Other current liabilities   839    960 
Total current liabilities   1,369    1,985 
       
Long-term debt   7,146    7,740 
Deferred income taxes, net   44    178 
Other long-term liabilities   1,082    1,153 
Total long-term liabilities   8,272    9,071 
       
Commitments and contingencies      
Redeemable noncontrolling interest   58    28 
       
Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at December 31, 2017 and 2016 and 391,237,308 and 389,366,241 outstanding at December 31, 2017 and 2016, respectively   37    36 
Additional paid-in capital   11,031    10,993 
Retained earnings   1,929    5,056 
Accumulated other comprehensive loss   (290)   (283)
Total controlling interest shareholders' equity   12,707    15,802 
Noncontrolling interest   4    3 
Total equity   12,711    15,805 
Total liabilities and equity $ 22,410  $ 26,889 


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


  Years ended December 31,  
  2017  2016  2015  
           
Cash flows from operating activities          
Net income (loss) $ (3,097) $ 827  $ 897  
Adjustments to reconcile to net cash provided by operating activities:          
Depreciation   832    893    963  
Share-based compensation expense   41    42    64  
Loss on impairment   1,498    93    1,875  
(Gain) loss on disposal of assets, net   1,603    (4)   35  
(Gain) loss on retirement of debt   55    (148)   (23) 
Deferred income tax expense (benefit)   89    68    (134) 
Other, net   55    14    74  
Changes in deferred revenues, net   33    219    (90) 
Changes in deferred costs, net   54    72    179  
Changes in other operating assets and liabilities, net   (19)   (165)   (395) 
Net cash provided by operating activities   1,144    1,911    3,445  
           
Cash flows from investing activities          
Capital expenditures   (497)   (1,344)   (2,001) 
Proceeds from disposal of assets, net   350    30    54  
Deposits into short-term investments   (450)   —    —  
Other, net   10    1    15  
Net cash used in investing activities   (587)   (1,313)   (1,932) 
           
Cash flows from financing activities          
Proceeds from issuance of debt, net of discounts and issue costs   1,144    2,401    —  
Repayments of debt    (2,284)   (2,295)   (1,506) 
Deposits to cash accounts restricted for financing activities   (97)   (85)   —  
Proceeds from cash accounts and investments restricted for financing activities   150    124    110  
Distributions of qualifying additional paid-in capital   —    —    (381) 
Distributions to holders of noncontrolling interest   —    (30)   (29) 
Other, net   (3)   —    (3) 
Net cash provided by (used in) financing activities   (1,090)   115    (1,809) 
           
Net increase (decrease) in cash and cash equivalents   (533)   713    (296) 
Cash and cash equivalents at beginning of period   3,052    2,339    2,635  
Cash and cash equivalents at end of period $ 2,519  $ 3,052  $ 2,339  




                 
TRANSOCEAN LTD. AND SUBSIDIARIES 
FLEET OPERATING STATISTICS 
                 
  Operating Revenues (in millions) 
  Three months ended   Years ended  
  December 31,  September 30, December 31,  December 31,  December 31,  
  2017 2017 2016 2017 2016 
Contract drilling revenues                
Ultra-deepwater floaters $ 404 $ 511 $ 560 $ 1,917 $ 2,318 
Harsh environment floaters   105   106   100   437   483 
Deepwater floaters   37   35   35   143   214 
Midwater floaters   17   18   30   66   388 
High-specification jackups   26   29   66   168   289 
Contract intangible revenue   —   —   2   —   13 
Total contract drilling revenues   589   699   793   2,731   3,705 
                 
Other revenues                
Customer early termination fees   25   99   169   201   396 
Customer reimbursement revenues and other   15   10   12   41   60 
Total other revenues   40   109   181   242   456 
Total revenues  $ 629 $ 808 $ 974 $ 2,973 $ 4,161 


                 
  Average Daily Revenue (1) 
  Three months ended   Years ended  
  December 31,  September 30, December 31,  December 31,  December 31,  
  2017 2017 2016 2017 2016 
Ultra-deepwater floaters $ 440,000 $ 449,300 $ 490,600 $ 472,400 $ 492,100 
Harsh environment floaters   202,900   213,100   253,500   235,900   329,100 
Deepwater floaters   202,400   187,300   204,500   195,200   253,900 
Midwater floaters   90,300   98,900   128,600   95,600   274,100 
High-specification jackups   145,500   151,200   143,500   143,900   143,800 
Total drilling fleet $ 296,700   319,000 $ 329,400 $ 321,300 $ 353,500 


                  
   Utilization (2) 
   Three months ended   Years ended  
   December 31,  September 30, December 31,  December 31,  December 31,  
   2017 2017 2016 2017 2016 
Ultra-deepwater floaters   39  42  43  39  45% 
Harsh environment floaters   80  77  61  73  57% 
Deepwater floaters   100  69  53  73  54% 
Midwater floaters   50  50  37  38  42% 
High-specification jackups   100  95  50  61  55% 
Total drilling fleet   53  52  46  48  48% 


                 
   Revenue Efficiency (3)
   Three months ended   Years ended
   December 31,  September 30, December 31,  December 31,  December 31, 
   2017 2017 2016 2017 2016
Ultra-deepwater floaters   90.9  98.6  100.1  96.3  97.8%
Harsh environment floaters   94.8  92.0  97.1  95.5  97.8%
Deepwater floaters   96.3  90.0  93.4  93.6  96.3%
Midwater floaters   95.8  97.4  94.7  96.1  99.0%
High-specification jackups   99.3  99.3  115.0  100.9  97.6%
Total drilling fleet   92.4  97.1  100.3  96.3  97.8%
                 
(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 (LOSS) AND ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE 
(In millions, except per share data) 
                       
  YTD QTD YTD QTD YTD QTD QTD 
  12/31/17 12/31/17 09/30/17 09/30/17 06/30/17 06/30/17 03/31/17 
Adjusted Net Income (Loss)                      
Net income (loss) attributable to controlling interest, as reported $ (3,127) $ (111) $ (3,016) $ (1,417) $ (1,599) $ (1,690) $ 91  
Litigation matters   (8)   (1)   (7)   —    (7)   1    (8) 
Restructuring charges   2    1    1    (1)   2    2    —  
Acquisition costs   4    —    4    4    —    —    —  
Loss on impairment of assets   1,497    (2)   1,499    1,386    113    113    —  
(Gain) loss on disposal of assets, net   1,590    (6)   1,596    1    1,595    1,597    (2) 
Loss on retirement of debt   55    6    49    1    48    48    —  
Discrete tax items and other, net   (37)   20    (57)   90    (147)   (70)   (77) 
Net income (loss), as adjusted $ (24) $ (93) $ 69  $ 64  $ 5  $ 1  $ 4  
                       
Adjusted Diluted Earnings (Loss) Per Share:                      
Diluted earnings (loss) per share, as reported $ (8.00) $ (0.28) $ (7.72) $ (3.62) $ (4.09) $ (4.32) $ 0.23  
Litigation matters   (0.02)   —    (0.02)   —    (0.02)   —    (0.02) 
Restructuring charges   —    —    —    —    —    —    —  
Acquisition costs   0.01    —    0.01    0.01    —    —    —  
Loss on impairment of assets   3.84    —    3.84    3.54    0.29    0.29    —  
Loss on disposal of assets, net   4.07    (0.01)   4.08    —    4.08    4.08    —  
Loss on retirement of debt   0.14    0.01    0.12    —    0.12    0.12    —  
Discrete tax items and other, net   (0.10)   0.04    (0.13)   0.23    (0.37)   (0.17)   (0.20) 
Diluted earnings (loss) per share, as adjusted $ (0.06) $ (0.24) $ 0.18  $ 0.16  $ 0.01  $ —  $ 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  
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  
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 millions, except percentages)
                      
                      
  YTD QTD YTD QTD YTD QTD QTD
  12/31/17 12/31/17 09/30/17 09/30/17 06/30/17 06/30/17 03/31/17
                      
Operating  revenues $ 2,973  $ 629  $ 2,344  $ 808  $ 1,536  $ 751  $ 785 
Drilling contract termination fees   (201)   (25)   (176)   (99)   (77)   (40)   (37)
Adjusted Normalized Revenues $ 2,772  $ 604  $ 2,168  $ 709  $ 1,459  $ 711  $ 748 
                      
Net income (loss) $ (3,097) $ (102) $ (2,995) $ (1,411) $ (1,584) $ (1,679) $ 95 
Interest expense, net of interest income   448    114    334    91    243    122    121 
Income tax expense (benefit)   94    (9)   103    180    (77)   (37)   (40)
Depreciation expense   832    184    648    197    451    219    232 
EBITDA   (1,723)   187    (1,910)   (943)   (967)   (1,375)   408 
                      
Litigation matters   (8)   (2)   (6)   —    (6)   2    (8)
Restructuring charges   3    1    2    —    2    2    — 
Acquisition costs   4    —    4    4    —    —    — 
Loss on impairment of assets   1,498    —    1,498    1,385    113    113    — 
(Gain) loss on disposal of assets, net   1,590    (6)   1,596    1    1,595    1,597    (2)
Loss on retirement of debt   55    6    49    1    48    48    — 
Adjusted EBITDA   1,419    186    1,233    448    785    387    398 
                      
Drilling contract termination fees   (201)   (25)   (176)   (99)   (77)   (40)   (37)
Adjusted Normalized EBITDA $ 1,218  $ 161  $ 1,057  $ 349  $ 708  $ 347  $ 361 
                      
EBITDA margin   (58)%  30 %  (81)%  (117)%  (63)%  (183)% 52%
Adjusted EBITDA margin   48 %  30 %  53 %  55 %  51 %  52 % 51%
Adjusted Normalized EBITDA margin   44 %  27 %  49 %  49 %  49 %  49 % 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 interest income   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 millions, except tax rates) 
                 
                 
  Three months ended   Years ended 
  December 31,  September 30, December 31,  December 31,  December 31,  
  2017  2017  2016  2017  2016  
Income (loss) from continuing operations before income taxes $ (111) $ (1,231) $ 242  $ (3,003) $ 934  
Litigation matters   (2)   —    (30)   (8)   (30) 
Restructuring charges   1    —    11    3    28  
Acquisition costs   —    4    —    4    —  
Loss on impairment of assets   —    1,385    67    1,498    93  
(Gain) loss on disposal of assets, net   (6)   1    (5)   1,590    (13) 
(Gain) loss on retirement of debt   6    1    —    55    (148) 
Adjusted income from continuing operations before income taxes $ (112) $ 160  $ 285  $ 139  $ 864  
                 
Income tax expense (benefit) from continuing operations $ (9) $ 180  $ (15) $ 94  $ 107  
Litigation matters   (1)   —    (2)   —    (2) 
Restructuring charges   —    1    —    1    2  
Acquisition costs   —    —    —    —    —  
Loss on impairment of assets   2    (1)   1    1    2  
Gain on disposal of assets, net   —    —    —    —    —  
Changes in estimates (1)   (20)   (90)   26    37    50  
Adjusted income tax expense from continuing operations (2) $ (28) $ 90  $ 10  $ 133  $ 159  
                 
Effective Tax Rate (3)   8.3   (14.7)  (6.5)  (3.1)  11.5 %
                 
Effective Tax Rate, excluding discrete items (4)   25.4   56.5   3.3   95.2   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 
(a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities. 
                 
(2) The three months and year ended December 31, 2017 includes $78 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) Our effective tax rate is calculated as income tax expense for continuing operations divided by income from continuing operations before 
income taxes. 
                 
(4) 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. 
                 

 

Transocean Ltd.