NYSE: RIG 7.46 0.10 1.32% 2:17 P.M. ET
Share Page Print Page
Back to all news articles

Transocean Ltd. Reports Second Quarter 2018 Results

July 30, 2018
  • Total contract drilling revenues were $790 million, compared with $664 million in the first quarter of 2018;
  • Revenue efficiency(1) was 97.4 percent, compared with 91.5 percent in the prior quarter;
  • Operating and maintenance expense was $431 million, compared with $424 million in the prior period;
  • Net loss attributable to controlling interest was $1.135 billion, $2.46 per diluted share, compared with net loss attributable to controlling interest of $210 million, $0.48 per diluted share, in the first quarter of 2018;
  • Adjusted net loss was $18 million, $0.04 per diluted share, excluding $1.117 billion of net unfavorable items. This compares with adjusted net loss of $210 million, $0.48 per diluted share, in the prior quarter;
  • During the second quarter, the company acquired a 33% interest in the newbuild, harsh environment semisubmersible Transocean Norge (formerly the West Rigel) through a joint venture with Hayfin Capital Management LLP (“Hayfin”); and
  • Contract backlog was $11.7 billion as of the July 2018 Fleet Status Report.

STEINHAUSEN, Switzerland, July 30, 2018 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE: RIG) today reported net loss attributable to controlling interest of $1.135 billion, $2.46 per diluted share, for the three months ended June 30, 2018.

Second quarter 2018 results included net unfavorable items of $1.117 billion, or $2.42 per diluted share, as follows:

  • $548 million, $1.18 per diluted share, loss on impairment of three floaters previously announced for retirement;
  • $463 million, $1.00 per diluted share, associated with a goodwill impairment charge;
  • $91 million, $0.20 per diluted share, in discrete tax expense;
  • $11 million, $0.03 per diluted share, in restructuring charges;
  • $3 million, $0.01 per diluted share, loss on impairment of the deepwater floater asset group; and
  • $1 million loss related to the early retirement of debt, offset by gain on disposal of assets.

After consideration of these net unfavorable items, second quarter 2018 adjusted net loss was $18 million, or $0.04 per diluted share.

Contract drilling revenues for the three months ended June 30, 2018, sequentially increased $126 million to $790 million. The increase was primarily due to a full quarter’s contribution from the four, CAT-D harsh environment semisubmersibles acquired from Songa in January 2018 and the newbuild ultra-deepwater drillship, Deepwater Poseidon, that commenced operations in February 2018. The second quarter was also favorably impacted by higher revenue efficiency and utilization on the company’s ultra-deepwater fleet.

Contract drilling revenues included customer early termination fees of $37 million on the Discoverer Clear Leader, a decrease of $1 million from the prior quarter. The second quarter also included a non-cash revenue reduction of $30 million from contract intangible amortization associated with the Songa acquisition.

Operating and maintenance expense was $431 million, compared with $424 million in the prior quarter. The second quarter included a full quarter’s activity from both the Songa rigs and the newbuild drillship, Deepwater Poseidon.

General and administrative expense was $52 million, compared with $47 million in the first quarter of 2018. The second quarter was impacted by un-forecasted charges, including $7 million related to the early retirement of certain personnel.

Depreciation expense was $211 million, up from $202 million in the first quarter of 2018. The increase was primarily due to the acquisition of Songa.

Interest expense, net of amounts capitalized, was $148 million, compared with $147 million in the prior quarter. Capitalized interest sequentially decreased $6 million to $7 million primarily due to the commencement of operations of the Deepwater Poseidon. Interest income was $13 million, compared with $12 million in the prior quarter.

The Effective Tax Rate(2) was (8.0) percent, up from (42.2) percent in the prior quarter. The increase was primarily due to impairment losses in jurisdictions with no tax benefit. Also, the second quarter of 2018 included estimated transition taxes associated with the U.S. tax reform (“2017 Tax Act”). This estimate was partly offset by changes in the utilization of U.S. foreign tax credits. The Effective Tax Rate excluding discrete items(3) was 22.0 percent, compared with (42.8) percent in the previous quarter.

Cash flows from operating activities were $3 million, compared with $103 million in the prior quarter. The decrease was largely associated with increased interest payments, as well as income tax payments partly related to the aforementioned transition taxes.

Second quarter 2018 capital expenditures were $39 million, compared with $53 million in the previous quarter. Additionally, during the second quarter, the company acquired a 33% interest in the newbuild, harsh environment semisubmersible Transocean Norge through a joint venture with Hayfin, with an initial investment of $91 million.

“Operationally, we delivered another solid quarter, with an Adjusted Normalized EBITDA margin of 40% on Adjusted Normalized Revenue of $783 million, representing a 21% sequential increase,” said President and Chief Executive Officer, Jeremy Thigpen. “This performance was driven by strong revenue efficiency, exceeding 97 percent, and increased activity, as the second quarter marked the first full quarter of operations for all five of our newest ultra-deepwater drillships, as well as the four recently acquired CAT-D harsh environment semisubmersibles from Songa.”

“During the quarter, we continued to high-grade our fleet, acquiring a 33% interest in the newbuild, harsh environment semisubmersible Transocean Norge, while retiring four, less competitive floaters.”

“We also further strengthened our balance sheet and extended our liquidity runway by negotiating a new $1 billion revolving credit facility extending into 2023, refinancing debt associated with the Songa acquisition, and executing on a secured facility for the Deepwater Pontus.”

Thigpen concluded: “Our industry-leading floater fleet, consistently strong operating performance, solid liquidity position, and enviable backlog, which includes several new contracts approximating $400 million, positions us well at a time when our optimism about the market’s recovery is growing.”

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 43 mobile offshore drilling units consisting of 24 ultra-deepwater floaters, 12 harsh environment floaters, two deepwater floaters and five midwater floaters. In addition, the company is constructing two ultra-deepwater drillships and one harsh environment semisubmersible that the company has one-third interest. We also continue to operate one high-specification jackup that was under a drilling contract when we sold the rig, and we will continue to operate this jackup until completion or novation of the drilling contract.

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

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EDT, 3 p.m. CEST, on Tuesday, July 31, 2018, to discuss the results. To participate, dial +1 334-323-0522 and refer to conference code 3966625 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. EDT, 6 p.m. CEST, on July 31, 2018. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 3966625 and PIN 7706. 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 success of our business following 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, 2017, 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 per share data)
(Unaudited)


                           
    Three months ended   Six months ended  
    June 30,    June 30,   
    2018     2017     2018     2017    
                           
Contract drilling revenues (1)   $  790     $  705     $  1,454     $  1,443    
Other revenues      —        46        —        93    
       790        751        1,454        1,536    
Costs and expenses                          
Operating and maintenance      431        331        855        678    
Depreciation      211        219        413        451    
General and administrative      52        35        99        74    
       694        585        1,367        1,203    
Loss on impairment      (1,014 )      (113 )      (1,014 )      (113 )  
Gain (loss) on disposal of assets, net      1        (1,595 )      6        (1,593 )  
Operating loss      (917 )      (1,542 )      (921 )      (1,373 )  
                           
Other income (expense), net                          
Interest income      13        7        25        13    
Interest expense, net of amounts capitalized      (148 )      (129 )      (295 )      (256 )  
Loss on retirement of debt      (2 )      (48 )      (2 )      (48 )  
Other, net      —        (4 )      (10 )      3    
       (137 )      (174 )      (282 )      (288 )  
Loss before income tax expense (benefit)      (1,054 )      (1,716 )      (1,203 )      (1,661 )  
Income tax expense (benefit)      85        (37 )      148        (77 )  
                           
Net loss      (1,139 )      (1,679 )      (1,351 )      (1,584 )  
Net income (loss) attributable to noncontrolling interest      (4 )      11        (6 )      15    
Net loss attributable to controlling interest   $  (1,135 )   $  (1,690 )   $  (1,345 )   $  (1,599 )  
                           
Loss per share                          
Basic   $  (2.46 )   $  (4.32 )   $  (2.99 )   $  (4.09 )  
Diluted   $  (2.46 )   $  (4.32 )   $  (2.99 )   $  (4.09 )  
                           
Weighted-average shares outstanding                          
Basic      462        391        450        391    
Diluted      462        391        450        391    

___________________________________

(1) Contract drilling revenues, in the three and six months ended June 30, 2018, includes revenues of (a) $37 million and $75 million, respectively, resulting from contract early terminations and cancellations, (b) $25 million and $51 million, respectively, from customer reimbursements and (c) a reduction of $30 million and $49 million, respectively, resulting from the amortization of contract intangible assets.



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


               
    June 30,    December 31,   
    2018     2017    
               
Assets              
Cash and cash equivalents   $  2,506     $  2,519    
Short-term investments      —        450    
Accounts receivable, net of allowance for doubtful accounts
of less than $1 at June 30, 2018 and December 31, 2017
     619        596    
Materials and supplies, net of allowance for obsolescence
of $145 and $141 at June 30, 2018 and December 31, 2017, respectively
     414        418    
Restricted cash accounts and investments      490        466    
Other current assets      188        157    
Total current assets      4,217        4,606    
               
Property and equipment      24,236        22,693    
Less accumulated depreciation      (5,278 )      (5,291 )  
Property and equipment, net      18,958        17,402    
Contract intangible assets      583        —    
Deferred income taxes, net      44        47    
Other assets      444        355    
Total assets   $  24,246     $  22,410    
               
Liabilities and equity              
Accounts payable   $  163     $  201    
Accrued income taxes      76        79    
Debt due within one year      1,816        250    
Other current liabilities      771        839    
Total current liabilities      2,826        1,369    
               
Long-term debt      7,814        7,146    
Deferred income taxes, net      72        44    
Other long-term liabilities      1,172        1,082    
Total long-term liabilities      9,058        8,272    
               
Commitments and contingencies              
Redeemable noncontrolling interest      —        58    
               
Shares, CHF 0.10 par value, 490,568,452 authorized, 143,771,173 conditionally authorized, 462,864,563 issued and 461,862,248  outstanding at June 30, 2018, and 417,060,033 authorized, 143,783,041 conditionally authorized, 394,801,990 issued and 391,237,308 outstanding at December 31, 2017      44        37    
Additional paid-in capital      12,022        11,031    
Retained earnings      584        1,929    
Accumulated other comprehensive loss      (291 )      (290 )  
Total controlling interest shareholders’ equity      12,359        12,707    
Noncontrolling interest      3        4    
Total equity      12,362        12,711    
Total liabilities and equity   $  24,246     $  22,410    




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


               
    Six months ended  
    June 30,   
    2018     2017    
Cash flows from operating activities              
Net loss   $  (1,351 )   $  (1,584 )  
Adjustments to reconcile to net cash provided by operating activities:              
Contract intangible asset amortization      49        —    
Depreciation      413        451    
Share-based compensation expense      28        21    
Loss on impairment      1,014        113    
(Gain) loss on disposal of assets, net      (6 )      1,593    
Loss on retirement of debt      2        48    
Deferred income tax expense (benefit)      46        (39 )  
Other, net      5        18    
Changes in deferred revenues, net      (72 )      (104 )  
Changes in deferred costs, net      7        28    
Changes in other operating assets and liabilities, net      (29 )      (1 )  
Net cash provided by operating activities      106        544    
               
Cash flows from investing activities              
Capital expenditures      (92 )      (258 )  
Proceeds from disposal of assets, net      23        329    
Unrestricted and restricted cash acquired in business combination      131        —    
Investment in unconsolidated affiliates      (106 )      —    
Deposits into short-term investments      (50 )      —    
Proceeds from maturities of short-term investments      500        —    
Other, net      —        (15 )  
Net cash provided by investing activities      406        56    
               
Cash flows from financing activities              
Proceeds from issuance of debt, net of issue costs      —        403    
Repayments of debt      (388 )      (1,533 )  
Proceeds from investments restricted for financing activities      26        50    
Payments to terminate derivative instruments      (92 )      —    
Other, net      (26 )      (3 )  
Net cash used in financing activities      (480 )      (1,083 )  
               
Net increase (decrease) in unrestricted and restricted cash and cash equivalents      32        (483 )  
Unrestricted and restricted cash and cash equivalents at beginning of period      2,975        3,433    
Unrestricted and restricted cash and cash equivalents at end of period   $  3,007     $  2,950    




                                 
TRANSOCEAN LTD. AND SUBSIDIARIES  
FLEET OPERATING STATISTICS  
                                 
                                 
    Three months ended   Six months ended  
    June 30,    March 31,   June 30,    June 30,    June 30,   
Contract Drilling Revenues (1) (in millions)   2018   2018   2017   2018   2017  
Contract drilling revenues                                
Ultra-deepwater floaters   $  470   $  378   $  497   $  848   $  1,002  
Harsh environment floaters      252      204      104      456      226  
Deepwater floaters      35      35      36      70      71  
Midwater floaters      18      20      18      38      31  
High-specification jackups      15      27      50      42      113  
Total contract drilling revenues      790      664      705      1,454      1,443  
                                 
Other revenues                                
Customer early termination fees      —      —      40      —      77  
Customer reimbursement revenues and other      —      —      6      —      16  
Total other revenues      —      —      46      —      93  
Total revenues   $  790   $  664   $  751   $  1,454   $  1,536  


                                 
                                 
    Three months ended   Six months ended  
    June 30,    March 31,   June 30,    June 30,    June 30,   
Average Daily Revenue (2)   2018   2018   2017   2018   2017  
Ultra-deepwater floaters   $  377,600   $  381,600   $  482,200   $  379,300   $  500,500  
Harsh environment floaters      304,600      279,100      262,200      292,700      269,900  
Deepwater floaters      189,800      193,400      199,000      191,600      195,500  
Midwater floaters      99,100      111,500      100,300      105,300      96,700  
High-specification jackups      150,600      150,000      142,800      150,200      141,900  
Total drilling fleet   $  308,300      287,600   $  329,900   $  298,600   $  333,800  


                                   
                                   
      Three months ended   Six months ended  
      June 30,    March 31,   June 30,    June 30,    June 30,   
Utilization (3)     2018   2018   2017   2018   2017  
Ultra-deepwater floaters      47    35    38    41    37 %  
Harsh environment floaters      81    84    62    82    66 %  
Deepwater floaters      100    100    67    100    67 %  
Midwater floaters      35    38    33    36    30 %  
High-specification jackups      95    97    54    96    52 %  
Total drilling fleet      57    52    44    55    44 %  


                                 
                                 
      Three months ended   Six months ended
      June 30,    March 31,   June 30,    June 30,    June 30, 
Revenue Efficiency (4)     2018   2018   2017   2018   2017
Ultra-deepwater floaters      99.7    88.3    97.1    94.4    97.5 %
Harsh environment floaters      94.5    95.2    98.4    94.8    97.6 %
Deepwater floaters      92.3    93.0    95.6    92.7    94.1 %
Midwater floaters      99.1    96.6    98.8    97.8    95.4 %
High-specification jackups      99.7    99.4    98.7    99.5    101.6 %
Total drilling fleet      97.4    91.5    97.4    94.7    97.6 %
                                 
                                 
(1) Contract drilling revenues, in the three and six months ended June 30, 2018, includes revenues of (a) $37 million and $75 million, respectively, resulting from
contract early terminations and cancellations, (b) $25 million and $51 million, respectively, from customer reimbursements and (c) a reduction of $30 million and
$49 million, respectively, resulting from the amortization of contract intangible assets.
               
(2) 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.
                                 
(3) 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.
                                 
(4) 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  
                    06/30/18   06/30/18   03/31/18  
Adjusted Net Loss                                            
Net loss attributable to controlling interest, as reported                           $  (1,345 )   $  (1,135 )   $  (210 )  
Acquisition and restructuring costs                              18        11        7    
Loss on impairment of goodwill and other assets                              1,014        1,014        —    
Gain on disposal of assets, net                              (7 )      (1 )      (6 )  
Loss on retirement of debt                              2        2        —    
Discrete tax items and other, net                              90        91        (1 )  
Net loss, as adjusted                           $  (228 )   $  (18 )   $  (210 )  
                                             
Adjusted Diluted Loss Per Share:                                            
Diluted loss per share, as reported                           $  (2.99 )   $  (2.46 )   $  (0.48 )  
Acquisition and restructuring costs                              0.05        0.03        0.02    
Loss on impairment of goodwill and other assets                              2.26        2.19        —    
Gain on disposal of assets, net                              (0.02 )      —        (0.02 )  
Loss on retirement of debt                              —        —        —    
Discrete tax items and other, net                              0.20        0.20        —    
Diluted loss per share, as adjusted                           $  (0.50 )   $  (0.04 )   $  (0.48 )  


                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
    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 )  
Acquisition and restructuring costs      6        1        5        3        2        2        —    
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 )  
Acquisition and restructuring costs      0.01        —        0.01        0.01        —        —        —    
Loss on impairment of assets      3.84        —        3.84        3.54        0.29        0.29        —    
(Gain) 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    




                                           
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
                    06/30/18   06/30/18   03/31/18
                                           
Contract drilling revenues                           $  1,454     $  790     $  664  
Drilling contract termination fees                              (75 )      (37 )      (38 )
Contract intangible amortization                              49        30        19  
Adjusted Normalized Revenues                           $  1,428     $  783     $  645  
                                           
Net loss                           $  (1,351 )   $  (1,139 )   $  (212 )
Interest expense, net of interest income                              270        135        135  
Income tax expense                              148        85        63  
Depreciation expense                              413        211        202  
Contract intangible amortization                              49        30        19  
EBITDA                              (471 )      (678 )      207  
                                           
Acquisition and restructuring costs                              18        11        7  
Loss on impairment of goodwill and other assets                              1,014        1,014        —  
Gain loss on disposal of assets, net                              (7 )      (1 )      (6 )
Loss on retirement of debt                              2        2        —  
Adjusted EBITDA                              556        348        208  
                                           
Drilling contract termination fees                              (75 )      (37 )      (38 )
Adjusted Normalized EBITDA                           $  481     $  311     $  170  
                                           
EBITDA margin                             (32 )%     (86 )%     31 %
Adjusted EBITDA margin                             38 %     44 %     31 %
Adjusted Normalized EBITDA margin                             34 %     40 %     26 %


                                           
    YTD   QTD   YTD   QTD   YTD   QTD   YTD
    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 )
Acquisition and restructuring costs      7        1        6        4        2        2        —  
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 %


                                 
                                 
TRANSOCEAN LTD. AND SUBSIDIARIES  
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS  
(In millions, except tax rates)  
                                 
                                 
    Three months ended   Six months ended  
    June 30,    March 31,   June 30,    June 30,    June 30,   
    2018     2018     2017     2018     2017    
Income (loss) before income taxes   $  (1,054 )   $  (149 )   $  (1,716 )   $  (1,203 )   $  (1,661 )  
Litigation matters      —        —        2        —        (6 )  
Acquisition and restructuring costs      11        7        2        18        2    
Loss on impairment of goodwill and other assets      1,014        —        113        1,014        113    
(Gain) loss on disposal of assets, net      (1 )      (6 )      1,597        (7 )      1,595    
Loss on retirement of debt      2        —        48        2        48    
Adjusted income (loss) before income taxes   $  (28 )   $  (148 )   $  46     $  (176 )   $  91    
                                 
Income tax expense (benefit)   $  85     $  63     $  (37 )   $  148     $  (77 )  
Litigation matters      —        —        1        —        1    
Acquisition and restructuring costs      —        —        —        —        —    
Loss on impairment of goodwill and other assets      —        —        —        —        —    
(Gain) loss on disposal of assets, net      —        —        —        —        —    
Changes in estimates (1)      (91 )      1        70        (90 )      147    
Adjusted income tax expense (benefit) (2)   $  (6 )   $  64     $  34     $  58     $  71    
                                 
Effective Tax Rate (3)      (8.0 )    (42.2 )    2.2      (12.3 )    4.7   %
                                 
Effective Tax Rate, excluding discrete items (4)      22.0      (42.8 )    74.0      (32.5 )    78.0   %
                                 
                                 
(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 ended June 30, 2018 includes $18 million of additional tax benefit reflecting the catch-up effect of a decrease  
in the annual effective tax rate from the previous quarter estimate.  
                                 
(3) Our effective tax rate is calculated as income tax expense divided by income before income taxes.  
                                 
(4) Our effective tax rate, excluding discrete items, is calculated as 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 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.