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Transocean Ltd. Reports Third Quarter 2012 Results

November 5, 2012

ZUG, SWITZERLAND--(Marketwire - Nov 4, 2012) - Transocean Ltd. ( NYSE : RIG ) ( SIX : RIGN )

  • Third quarter 2012 revenues were $2.440 billion compared with $2.352 billion in the second quarter 2012;
  • Operating and maintenance expenses for the third quarter were $1.338 billion, compared with $1.381 billion for the second quarter 2012. Second quarter operating and maintenance expenses exclude $750 million for estimated loss contingencies associated with the Macondo well incident;
  • Third quarter 2012 net loss attributable to controlling interest was $381 million, which included $880 million of net unfavorable items primarily associated with the impairment of assets included in discontinued operations. This compares with the second quarter 2012 net loss attributable to controlling interest of $304 million, which included $621 million of net unfavorable items;
  • Third quarter Annual Effective Tax Rate(3) from continuing operations was 15.2 percent compared with 28.2 percent in the second quarter 2012;
  • Third quarter net loss attributable to controlling interest was $1.06 per diluted share. After adjusting for net unfavorable items, adjusted earnings from continuing operations were $499 million, or $1.37 per diluted share;
  • Cash flows from operating activities were $786 million in the third quarter, compared with $459 million in the second quarter 2012;
  • Revenue efficiency(1) from continuing operations was 94.3 percent in the third quarter, compared with 92.1 percent in the second quarter 2012. Third quarter 2012 Ultra-Deepwater revenue efficiency was 95.8 percent, compared with 92.2 percent in the prior quarter. Fleet utilization(2) from continuing operations was 77 percent in the third quarter, compared with 72 percent in the second quarter 2012; and
  • New contracts associated with continuing operations totaling $10.2 billion were secured in the Fleet Status Report periods July 18, 2012 through October 17, 2012. Backlog from continuing operations was $29.7 billion at October 17th, a net increase of $8.3 billion.

Transocean Ltd. ( NYSE : RIG ) ( SIX : RIGN ) today reported a net loss attributable to controlling interest of $381 million, or $1.06 per diluted share, for the three months ended September 30, 2012. Third quarter 2012 results included net unfavorable items of $880 million, or $2.43 per diluted share. The results compare with a net loss attributable to controlling interest of $32 million, or $0.10 per diluted share, for the three months ended September 30, 2011. Third quarter 2011 results included net unfavorable items of $68 million, or $0.21 per diluted share, primarily associated with the company's acquisition of Aker Drilling.

Net unfavorable items, after tax, impacting the third quarter of 2012 included the following:

  • $878 million, or $2.43 per diluted share, loss on impairment of assets included in discontinued operations primarily associated with exiting the standard jackup market;
  • $48 million, or $0.13 per diluted share, net gain on the sale of two floaters, Discoverer 534 and Jim Cunningham;
  • $30 million, or $0.08 per diluted share, loss from discontinued operations. This includes $24 million, or $0.06 per diluted share associated with the standard jackups; the remainder is primarily associated with Challenger Minerals (North Sea) Limited; and
  • $20 million, or $0.05 per diluted share, loss due to discrete taxes and other items.

After adjusting for these net unfavorable items, adjusted earnings from continuing operations were $499 million, or $1.37 per diluted share. A reconciliation of the non-GAAP adjusted net income and diluted earnings per share is attached.

Operations Quarterly Review

Revenues from continuing operations for the three months ended September 30, 2012 were $2.440 billion, compared with revenues of $2.352 billion during the three months ended June 30, 2012. Contract drilling revenues increased $136 million mainly due to higher revenue efficiency(1) primarily on Ultra-Deepwater floaters, and lower out of service time. Revenue efficiency(1) from continuing operations was 94.3 percent for the third quarter, compared with 92.1 percent in the second quarter 2012. Other revenues decreased $48 million to $130 million for the third quarter 2012, compared with $178 million in the prior quarter, primarily due to decreased levels of low-margin drilling management services activity.

Operating and maintenance expenses from continuing operations decreased $43 million to $1.338 billion for the third quarter of 2012. This compares with $1.381 billion for the second quarter of 2012, excluding $750 million for estimated loss contingencies associated with the Macondo well incident. Contract drilling expenses increased by $17 million due to annual pay raises, activity increases, professional fees, and various other items, partly offset by lower costs in the third quarter associated with rigs undergoing surveys, contract preparation or other shipyard projects. The delayed commencement of shipyard projects favorably impacted contract drilling expenses in the third quarter. Costs associated with the company's drilling management services reporting unit decreased $60 million mostly due to reduced activity.

General and administrative expenses were $69 million for the third quarter 2012, compared with $79 million in the previous quarter. The decrease was primarily due to transaction costs in the second quarter associated with the Quantum exchange of its 50 percent interest in Transocean Pacific Drilling Inc. for Transocean Ltd.'s shares.

Income Taxes

Transocean's third quarter Effective Tax Rate(4) from continuing operations was 16.5 percent, compared with 5.0 percent in the second quarter 2012. The increase in the Effective Tax Rate(4) was due to changes in estimates primarily for settlements of prior years' tax liabilities. Transocean's Annual Effective Tax Rate(3) from continuing operations for the third quarter 2012 was 15.2 percent. This compares with 28.2 percent for the prior quarter. The decrease was primarily due to changes in the blend of income that is taxed based on gross revenues versus pre-tax income and rig movements between taxing jurisdictions, among other things. Third quarter 2012 income tax expense included a favorable adjustment of $31 million, or $0.09 per diluted share, required to reflect a decrease in the Annual Effective Tax Rate(3) to 20.5 percent for the nine months ended September 30, 2012, from 24.6 percent for the first half of 2012.

Other Items

For the third quarter, interest expense, net of amounts capitalized, was $180 million, compared with $183 million in the second quarter 2012. Capitalized interest for the third quarter 2012 was $12 million, unchanged from the prior quarter. Interest income increased to $15 million in the third quarter, compared with $13 million in the second quarter 2012.

Cash flows from operating activities were $786 million for the third quarter, compared with $459 million for the second quarter 2012. Capital expenditures from total operations were $225 million for the third quarter, compared with $236 million in the second quarter of 2012.

Forward-Looking Statements

Statements included in this news release, including those regarding estimates of Transocean's goodwill or long-lived asset impairments and the estimated loss contingencies associated with the Macondo well incident, are forward-looking statements that involve certain assumptions. These statements are based on currently available competitive, financial, and economic data along with our current operating plans and involve risks and uncertainties including, but not limited to, market conditions, Transocean's results of operations, the effect and results of litigation, assessments and contingencies, and other factors detailed in \"Risk Factors\" and elsewhere in Transocean's filings with the Securities and Exchange Commission. 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 outcomes may vary materially from those forecasted or expected. Transocean disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. EST, 4:00 p.m. CET, on Monday, November 5, 2012. To participate, dial +1 719-325-4828 and refer to confirmation code 2448847 approximately five to 10 minutes prior to the scheduled start time of the call.

In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto Transocean's website at www.deepwater.com and selecting \"Investor Relations.\" A file containing four charts that may be discussed during the conference call, titled \"3Q12 Charts,\" has been posted to Transocean's website and can also be found by selecting \"Investor Relations/Quarterly Toolkit.\" The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, \"RIG.\"

A telephonic replay of the conference call should be available after 1:00 p.m. EST, 7:00 p.m. CET, on November 5, 2012, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 2448847. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced internet addresses. Both replay options will be available for approximately 30 days.

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 115 mobile offshore drilling units consisting of 48 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment drilling rigs), 25 Midwater Floaters, nine High-Specification Jackups, 32 Standard Jackups and one swamp barge. Included in the 115 drilling units, the company has 32 Standard Jackups and one swamp barge classified as discontinued operations. In addition, we have six Ultra-Deepwater Drillships and three High-Specification Jackups under construction.

For more information about Transocean, please visit the website at www.deepwater.com.

Notes

(1) Revenue efficiency is defined as actual revenue divided by the highest amount of total revenue which could have been earned during the relevant period(s). See the accompanying schedule entitled \"Revenue Efficiency.\"

(2) 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 the company's fleet. See the accompanying schedule entitled \"Utilization.\"

(3) Annual Effective Tax Rate is defined as income tax expense from continuing operations excluding various discrete items (such as changes in estimates and tax on items excluded from income before income tax expense) divided by income from continuing operations before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes. See the accompanying schedule entitled \"Supplemental Effective Tax Rate Analysis.\"

(4) Effective Tax Rate is defined as income tax expense from continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled \"Supplemental Effective Tax Rate Analysis.\"

 
TRANSOCEAN LTD. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(In millions, except per share data)
(Unaudited)
 
  Three months ended
September 30,
  Nine months ended
September 30,
 
  2012  2011  2012  2011 
Operating revenues                
 Contract drilling revenues $2,310  $1,827  $6,498  $5,396 
 Other revenues  130   164   420   576 
   2,440   1,991   6,918   5,972 
Costs and expenses                
 Operating and maintenance  1,338   1,344   4,731   3,915 
 Depreciation and amortization  280   281   846   821 
 General and administrative  69   67   217   200 
   1,687   1,692   5,794   4,936 
Loss on impairment  -   -   (210)  - 
Gain (loss) on disposal of assets, net  50   (1)  40   (1)
Operating income  803   298   954   1,035 
                 
Other income (expense), net                
 Interest income  15   7   43   27 
 Interest expense, net of amounts capitalized  (180)  (151)  (543)  (443)
 Other, net  (8)  (77)  (32)  (79)
   (173)  (221)  (532)  (495)
Income from continuing operations before income tax expense  630   77   422   540 
Income tax expense  104   93   96   211 
Income (loss) from continuing operations  526   (16)  326   329 
Income (loss) from discontinued operations, net of tax  (909)  (5)  (994)  116 
                 
Net income (loss)  (383)  (21)  (668)  445 
Net income (loss) attributable to noncontrolling interest  (2)  11   7   34 
Net income (loss) attributable to controlling interest $(381) $(32) $(675) $411 
                 
Earnings (loss) per share-basic                
 Earnings (loss) from continuing operations $1.47  $(0.08) $0.90  $0.92 
 Earnings (loss) from discontinued operations  (2.53)  (0.02)  (2.80)  0.36 
 Earnings (loss) per share $(1.06) $(0.10) $(1.90) $1.28 
                 
Earnings (loss) per share-diluted                
 Earnings (loss) from continuing operations $1.47  $(0.08) $0.90  $0.92 
 Earnings (loss) from discontinued operations  (2.53)  (0.02)  (2.80)  0.36 
 Earnings (loss) per share $(1.06) $(0.10) $(1.90) $1.28 
                 
Weighted-average shares outstanding                
 Basic  359   320   354   320 
 Diluted  359   320   354   320 
                 
                 
                 
TRANSOCEAN LTD. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In millions, except share data)
(Unaudited)
 
  September 30,
2012
  December 31,
2011
 
Assets         
Cash and cash equivalents $6,001  $4,017 
Accounts receivable, net of allowance for doubtful accounts of $28 at September 30, 2012 and December 31, 2011  2,163   2,176 
Materials and supplies, net of allowance for obsolescence of $71 and $59 at September 30, 2012 and December 31, 2011, respectively  597   529 
Deferred income taxes, net  169   142 
Assets held for sale  930   26 
Other current assets  444   646 
  Total current assets  10,304   7,536 
         
Property and equipment  26,567   24,833 
Property and equipment of consolidated variable interest entities  817   2,252 
Less accumulated depreciation  6,925   6,297 
 Property and equipment, net  20,459   20,788 
Goodwill  2,987   3,217 
Other assets  1,562   3,491 
  Total assets $35,312  $35,032 
         
Liabilities and equity        
Accounts payable $876  $880 
Accrued income taxes  257   86 
Debt due within one year  2,701   1,942 
Debt of consolidated variable interest entities due within one year  28   245 
Other current liabilities  2,839   2,375 
  Total current liabilities  6,701   5,528 
         
Long-term debt  11,211   10,756 
Long-term debt of consolidated variable interest entities  177   593 
Deferred income taxes, net  450   514 
Other long-term liabilities  1,517   1,898 
  Total long-term liabilities  13,355   13,761 
         
Commitments and contingencies        
Redeemable noncontrolling interest  -   116 
         
Shares, CHF 15.00 par value, 402,282,355 authorized, 167,617,649 conditionally authorized, and 373,830,649 and 365,135,298 issued at September 30, 2012 and December 31, 2011, respectively; 359,418,883 and 349,805,793 outstanding at September 30, 2012 and December 31, 2011, respectively  5,129   4,982 
Additional paid-in capital  7,496   7,211 
Treasury shares, at cost, 2,863,267 held at September 30, 2012 and December 31, 2011  (240)  (240)
Retained earnings  3,399   4,180 
Accumulated other comprehensive loss  (512)  (496)
 Total controlling interest shareholders' equity  15,272   15,637 
 Noncontrolling interest  (16)  (10)
  Total equity  15,256   15,627 
  Total liabilities and equity $35,312  $35,032 
         
         
         
TRANSOCEAN LTD. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In millions)
(Unaudited)
 
  Three months ended
September 30,
  Nine months ended
September 30,
 
  2012  2011  2012  2011 
             
Cash flows from operating activities              
 Net income (loss) $(383) $(21) $(668) $445 
 Adjustments to reconcile to net cash provided by operating activities                
  Amortization of drilling contract intangibles  (9)  (12)  (32)  (32)
  Depreciation and amortization  280   281   846   821 
  Depreciation and amortization of assets in discontinued operations  48   80   182   258 
  Share-based compensation expense  24   20   72   74 
  Loss on impairment  -   -   210   - 
  Loss on impairment of assets in discontinued operations  878   7   913   32 
  (Gain) loss on disposal of assets, net  (50)  1   (40)  1 
  (Gain) loss on disposal of assets in discontinued operations, net  1   1   (70)  (175)
  Amortization of debt issue costs, discounts and premiums, net  17   33   52   95 
  Deferred income taxes  (61)  (6)  (104)  30 
  Other, net  12   79   47   85 
  Changes in deferred revenue, net  (64)  (36)  (69)  7 
  Changes in deferred expenses, net  51   18   30   (66)
  Changes in operating assets and liabilities  42   47   416   (353)
Net cash provided by operating activities  786   492   1,785   1,222 
                 
Cash flows from investing activities                
 Capital expenditures  (201)  (124)  (646)  (633)
 Capital expenditures for discontinued operations  (24)  (13)  (75)  (37)
 Investment in marketable security  -   (199)  -   (199)
 Proceeds from disposal of assets, net  178   4   189   12 
 Proceeds from disposal of assets in discontinued operations, net  5   84   196   353 
 Payment for settlement of forward exchange contract  -   (78)  -   (78)
 Other, net  7   6   32   (27)
Net cash used in investing activities  (35)  (320)  (304)  (609)
                 
Cash flows from financing activities                
 Changes in short-term borrowings, net  -   2   (260)  58 
 Proceeds from debt  1,493   -   1,493   5 
 Repayments of debt  (264)  (23)  (584)  (272)
 Proceeds from restricted cash investments  106   -   298   - 
 Deposits to restricted cash investments  (42)  -   (158)  - 
 Distribution of qualifying additional paid-in capital  -   (254)  (278)  (508)
 Other, net  (7)  -   (8)  (4)
Net cash provided by (used in) financing activities  1,286   (275)  503   (721)
                 
Net increase (decrease) in cash and cash equivalents  2,037   (103)  1,984   (108)
Cash and cash equivalents at beginning of period  3,964   3,349   4,017   3,354 
Cash and cash equivalents at end of period $6,001  $3,246  $6,001  $3,246 
                 
 
 
TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS
 
  Operating Revenues (in millions) (1)
  Three months ended Nine months ended
September 30,
  September 30,
2012
 June 30,
2012
 September 30,
2011
 2012 2011
Contract Drilling Revenues               
 High-Specification Floaters:               
  Ultra Deepwater Floaters $1,213 $1,141 $1,030 $3,446 $2,878
  Deepwater Floaters  306  327  185  876  716
  Harsh Environment Floaters  247  264  190  766  522
 Total High-Specification Floaters  1,766  1,732  1,405  5,088  4,116
 Midwater Floaters  424  338  352  1,108  1,129
 High-Specification Jackups  110  93  58  270  119
Total Contract Drilling Revenues - continuing operations  2,300  2,163  1,815  6,466  5,364
                
Contract Intangible Revenue  10  11  12  32  32
Other Revenues               
 Client Reimbursable Revenues  46  34  39  123  107
 Integrated Services and Other  -  6  13  6  42
 Drilling Management Services  84  138  112  291  427
Total Other Revenues  130  178  164  420  576
Total Revenue from continuing operations  2,440  2,352  1,991  6,918  5,972
                
Discontinued operations:               
 Standard Jackups  245  209  237  654  710
 Other Rigs  7  7  6  21  20
 Client Reimbursable Revenues  6  7  5  18  15
Total discontinued operations  258  223  248  693  745
                
Total Company $2,698 $2,575 $2,239 $7,611 $6,717
                
  Average Daily Revenue (1)
  Three months ended Nine months ended
September 30,
  September 30,
2012
 June 30,
 2012
 September 30,
2011
 2012 2011
Continuing operations:               
 High-Specification Floaters:               
  Ultra Deepwater Floaters $539,300 $537,000 $524,800 $537,100 $504,000
  Deepwater Floaters  372,600  379,200  343,500  370,800  382,400
  Harsh Environment Floaters  439,600  433,200  433,800  449,500  423,100
 Total High-Specification Floaters  486,200  481,600  478,000  485,400  466,800
 Midwater Floaters  284,800  295,800  287,400  285,100  310,600
 High-Specification Jackups  156,700  141,500  115,000  139,900  112,500
Total continuing operations:  395,100  401,000  388,800  396,700  397,200
                
Discontinued operations               
 Standard Jackups  92,800  90,800  101,100  91,900  107,000
 Other Rigs  75,000  77,800  73,800  75,400  74,500
Total discontinued operations  92,200  90,300  100,100  91,300  105,700
                
Total Drilling Fleet $298,300 $305,400 $289,800 $301,500 $298,100
                
(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.
                
                
 
 
TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS (continued)
 
  Utilization (2)
  Three months ended Nine months ended
September 30,
  September 30,
2012
 June 30,
2012
 September 30,
2011
 2012 2011
Continuing operations:          
 High-Specification Floaters:          
  Ultra Deepwater Floaters 91% 87% 79% 87% 79%
  Deepwater Floaters 61% 59% 37% 55% 43%
  Harsh Environment Floaters 87% 96% 95% 89% 90%
 Total High-Specification Floaters 81% 79% 67% 77% 68%
 Midwater Floaters 65% 52% 55% 58% 56%
 High-Specification Jackups 84% 83% 66% 82% 50%
Total continuing operations 77% 72% 63% 72% 63%
           
Discontinued Operations:          
 Standard Jackups 66% 56% 49% 57% 46%
 Other Rigs 100% 100% 100% 99% 60%
Total discontinued operations 67% 57% 50% 58% 46%
           
Total Drilling Fleet 73% 66% 58% 67% 56%
           
(2) 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.
 
 
   
   
  Revenue Efficiency(3)
  Trailing Five Quarters and Historical Data
               
  3Q 2012 2Q 2012 1Q 2012 4Q 2011 3Q 2011 FY 2011 FY 2010
               
Ultra Deepwater 95.8% 92.2% 89.4% 89.5% 86.4% 87.7% 88.6%
Deepwater 93.5% 92.1% 83.2% 88.1% 87.7% 89.4% 90.3%
Harsh Environment Floaters 95.5% 98.1% 97.8% 98.0% 94.4% 97.4% 96.0%
Midwater Floaters 89.7% 87.4% 90.8% 94.2% 90.8% 92.6% 92.5%
High Specification Jackups 97.3% 94.5% 92.5% 93.4% 96.8% 94.8% 94.6%
Total continuing operations 94.3% 92.1% 89.9% 91.3% 88.5% 90.1% 90.8%
               
Standard Jackups 95.4% 97.4% 97.9% 96.6% 98.3% 97.8% 97.4%
Others 99.1% 99.4% 97.3% 98.6% 99.5% 98.7% 98.4%
Total discontinued operations 95.5% 97.5% 97.9% 96.6% 98.3% 97.8% 97.4%
               
Total Fleet 94.5% 92.5% 90.6% 91.9% 89.5% 90.9% 91.7%
               
(3) Revenue efficiency is defined as actual revenue divided by the highest amount of total revenue which could have been earned during the relevant period(s).
 
 
  
  
TRANSOCEAN LTD. AND SUBSIDIARIES 
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS 
(In US$ millions, except percentages) 
                
                
                
  Three months ended  Nine months ended 
  September 30,
2012
  June 30,
2012
  September 30,
2011
  September 30,
2012
  September 30,
2011
 
                     
Income (loss) from continuing operations before income taxes $630  $(321) $77  $422  $540 
 Add back (subtract):                    
 Litigation matters  8   750   -   758   - 
 Acquisition costs  -   -   5   1   5 
 Gain on disposal of other assets, net  (51)  -   -   (51)  - 
 Loss on impairment of goodwill and other assets  -   -   -   210   - 
 Loss on redeemed noncontrolling interest  -   14   -   25   - 
 Loss on forward exchange contract  -   -   78   -   78 
 Gain on sale of equity method investment  -   -   (13)  -   (13)
 Other, net  (1)  -   -   (2)  6 
Adjusted income from continuing operations before income taxes  586   443   147   1,363   616 
                     
Income tax (benefit) expense from continuing operations  104   (16)  93   96   211 
  Add back (subtract):                    
  Litigation matters  2   -   -   2   - 
  Gain on disposal of other assets  (3)  -   -   (3)  - 
  Loss on impairment  -   -   -   30   - 
  Changes in estimates (1)  (14)  141   7   154   (23)
  Other, net  -   -   -   -   2 
Adjusted income tax expense from continuing operations (2) $89  $125  $100  $279  $190 
                     
Effective Tax Rate (3)  16.5%  5.0%  120.8%  22.7%  39.1%
                     
Annual Effective Tax Rate (4)  15.2%  28.2%  68.0%  20.5%  30.8%
                     
(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 and nine months ended September 30, 2012 includes $(31) 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 and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. 
  
  
  
  
TRANSOCEAN LTD. AND SUBSIDIARIES 
Non-GAAP Financial Measures and Reconciliations 
Adjusted Net Income and Diluted Earnings Per Share 
(in US$ millions, except per share data) 
                
  YTD  QTR  YTD  QTR  QTR 
Adjusted Net Income 09/30/12  09/30/12  06/30/12  06/30/12  03/31/12 
Net income (loss) attributable to controlling interest, as reported $(675) $(381) $(294) $(304) $10 
 Add back (subtract):                    
  Litigation matters  756   6   750   750   - 
  Loss on impairment of goodwill and other assets  180   -   180   -   180 
  Gain on disposal of assets, net  (48)  (48)  -   -   - 
  Loss on redeemed noncontrolling interest  25   -   25   14   11 
  Loss on impairment of discontinued operations  911   878   33   12   21 
  (Gain) loss on sale of discontinued operations  (70)  -   (70)  (72)  2 
  Loss from discontinued operations  152   30   122   58   64 
  Discrete tax items and other, net  (154)  14   (168)  (141)  (27)
Net income, as adjusted $1,077  $499  $578  $317  $261 
                     
Diluted Earnings Per Share                    
Diluted earnings (loss) per share, as reported $(1.90) $(1.06) $(0.83) $(0.85) $0.03 
 Add back (subtract):                    
  Litigation matters  2.12   0.02   2.12   2.09   - 
  Loss on impairment of goodwill and other assets  0.50   -   0.51   -   0.51 
  Gain on disposal of assets, net  (0.13)  (0.13)  -   -   - 
  Loss on redeemed noncontrolling interest  0.07   -   0.07   0.04   0.03 
  Loss on impairment of discontinued operations  2.56   2.43   0.09   0.03   0.06 
  (Gain) loss on sale of discontinued operations  (0.19)  -   (0.20)  (0.20)  0.01 
  Loss from discontinued operations  0.42   0.08   0.34   0.16   0.18 
  Discrete tax items and other, net  (0.44)  0.03   (0.47)  (0.39)  (0.08)
Diluted earnings per share, as adjusted $3.01  $1.37  $1.63  $0.88  $0.74 
                     
  YTD  QTR  YTD  QTR  YTD  QTR QTR 
Adjusted Net Income 12/31/11  12/31/11  09/30/11  09/30/11  06/30/11  06/30/11 03/31/11 
Net income (loss) attributable to controlling interest, as reported $(5,754) $(6,165) $411  $(32) $443  $124 $319 
 Add back (subtract):                           
  Litigation matters  1,000   1,000   -   -   -   -  - 
  Acquisition costs  22   17   5   5   -   -  - 
  Loss on impairment of goodwill and other assets  5,201   5,201   -   -   -   -  - 
  Gain on disposal of assets, net  (13)  -   (13)  (13)  -   -  - 
  Loss on marketable security  13   13   -   -   -   -  - 
  Loss on forward exchange contract  78   -   78   78   -   -  - 
  Loss on impairment of discontinued operations  34   4   30   5   25   25  - 
  (Gain) loss on sale of discontinued operations  (201)  (24)  (177)  -   (177)  1  (178)
  Loss from discontinued operations  86   55   31   -   31   11  20 
  Discrete tax items and other, net  16   (10)  26   (7)  33   14  19 
Net income, as adjusted $482  $91  $391  $36  $355  $175 $180 
                            
Diluted Earnings Per Share                           
Diluted earnings (loss) per share, as reported $(17.88) $(18.76) $1.28  $(0.10) $1.38  $0.38 $0.99 
 Add back (subtract):                           
  Litigation matters  3.11   3.04   -   -   -   -  - 
  Acquisition costs  0.07   0.05   0.02   0.02   -   -  - 
  Loss on impairment of goodwill and other assets  16.15   15.83   -   -   -   -  - 
  Gain on disposal of assets, net  (0.04)  -   (0.04)  (0.04)  -   -  - 
  Loss on marketable security  0.04   0.04   -   -   -   -  - 
  Loss on forward exchange contract  0.24   -   0.24   0.24   -   -  - 
  Loss on impairment of discontinued operations  0.11   0.01   0.09   0.02   0.08   0.08  - 
  (Gain) loss on sale of discontinued operations  (0.62)  (0.07)  (0.53)  -   (0.54)  -  (0.55)
  Loss from discontinued operations  0.27   0.17   0.09   -   0.10   0.04  0.06 
  Discrete tax items and other, net  0.04   (0.03)  0.07   (0.03)  0.09   0.05  0.06 
Diluted earnings per share, as adjusted $1.49  $0.28  $1.22  $0.11  $1.11  $0.55 $0.56 
             
Note: 2010 has been removed pending restatement for discontinued operations.