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Transocean Ltd. Reports Fourth Quarter, Full Year 2018 Results

February 18, 2019
  • Total contract drilling revenues were $748 million, compared with $816 million in the third quarter of 2018;
  • Revenue efficiency(1) was 96%, compared with 95% in the prior quarter;
  • Operating and maintenance expense was $497 million, compared with $447 million in the prior period;
  • Net loss attributable to controlling interest was $242 million, $0.48 per diluted share, compared with net loss attributable to controlling interest of $409 million, $0.88 per diluted share, in the third quarter of 2018;
  • Adjusted net loss was $171 million, $0.34 per diluted share, excluding $71 million of net unfavorable items. This compares with adjusted net income of $30 million, $0.06 per diluted share, in the prior quarter;
  • Adjusted normalized EBITDA margin was $260 million or 34%, compared with $341 million or 42% in the prior quarter;
  • Cash flows from operating activities were $238 million, up from $214 million in the prior quarter;
  • In the fourth quarter, we acquired Ocean Rig in a cash and stock transaction valued at approximately $2.5 billion; and
  • Contract backlog was $12.2 billion as of the February 2019 Fleet Status Report.

STEINHAUSEN, Switzerland, Feb. 18, 2019 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE: RIG) today reported net loss attributable to controlling interest of $242 million, $0.48 per diluted share, for the three months ended December 31, 2018.

Fourth quarter 2018 results included unfavorable items of $71 million, or $0.14 per diluted share, as follows:

  • $18 million, $0.03 per diluted share, loss on impairment primarily for three floaters previously announced for retirement;
  • $12 million, $0.02 per diluted share, in acquisition costs; and
  • $52 million, $0.11 per diluted share, related to discrete tax expense.

These unfavorable items were partially offset by:

  • $11 million, $0.02 per diluted share, bargain purchase gain and other favorable items.

After consideration of these net favorable items, fourth quarter 2018 adjusted net loss was $171 million, or $0.34 per diluted share.

Contract drilling revenues for the three months ended December 31, 2018, sequentially decreased $68 million to $748 million due to lower utilization for the company’s ultra-deepwater and harsh environment fleet. Additionally, fourth quarter results were negatively impacted by unexpected weather-related downtime on two of our harsh environment rigs off the coast of Canada resulting in approximately $21 million in lost revenue. Partially offsetting these decreases was a $15 million increase in revenue from three working rigs acquired as part of the Ocean Rig acquisition in December.

Contract drilling revenues included customer early termination fees of $12 million on the Discoverer Clear Leader in the fourth quarter down from $37 million in the prior quarter. The fourth quarter also included a non-cash revenue reduction of $34 million from contract intangible amortization associated with the Songa and Ocean Rig acquisitions. The third quarter non-cash revenue reduction from contract intangible amortization was $29 million.

Operating and maintenance expense was $497 million, compared with $447 million in the prior quarter. The sequential increase was the result of costs related to the reactivation and contract preparation of Development Driller III and increased activity as a result of the Ocean Rig acquisition.

General and administrative expense was $54 million, compared with $35 million in the prior quarter. The increase was primarily due to professional fees associated with the Ocean Rig acquisition and for developing technology for improving fleet performance and reducing costs and a third quarter legal reimbursement that was not repeated in the fourth quarter.

Depreciation expense was $204 million, up from $201 million in the third quarter of 2018. The increase was primarily due to the acquisition of the Ocean Rig fleet.

Interest expense, net of amounts capitalized, was $165 million, compared with $160 million in the prior quarter. The increase was due to the senior notes issued during the fourth quarter of 2018 partially offset by senior secured term loans assumed in the Songa acquisition and retired in the third quarter. Capitalized interest was $8 million in the third and fourth quarters of 2018. Interest income was $17 million, compared with $11 million in the prior quarter.

The Effective Tax Rate(2) was (82.6)%, down from 6.7% in the prior quarter. The decrease was due to an estimate of a reserve item associated with U.S. tax reform (“2017 Tax Act”) in fourth quarter, offset by the release of certain valuation allowances. Additionally, the relative blend of income from operations in certain jurisdictions and fourth quarter financial results impacted tax expense.

Cash flows from operating activities increased $24 million sequentially to $238 million primarily due to the collection of certain receivables and advance payment for a farmout contract.

Fourth quarter 2018 capital expenditures of $44 million were related to the company’s newbuild drillships along with capital expenditures relating to asset and inventory management systems, reactivation of one rig and capital upgrades for certain rigs in our existing fleet. This compares with $48 million in the previous quarter.

“2018 will be remembered as a transformative year in Transocean’s long and storied history,” said President and Chief Executive Officer Jeremy Thigpen. “Through the acquisitions of Songa Offshore and Ocean Rig UDW, we added approximately $4.5 billion dollars of high margin backlog. And, when combined with our investment in a joint venture to market and operate the Transocean Norge, over the course of 2018, we added 21 rigs to our fleet, including 15 of the highest specification ultra-deepwater and harsh environment floaters in the industry.”

Thigpen added: “We also continued to operate at a high level for our customers, delivering full year 2018 revenue efficiency greater than 95%. This consistently strong operating performance, coupled with the quality of our fleet, our global presence and our customer relationships, helped us to secure 37 new floater contracts throughout the year, almost double the amount we booked in the previous year, and almost 50% more than any other offshore driller. Importantly, these contracts added almost $2 billion to our already industry-leading backlog, our largest annual total in the last four years.”

Thigpen concluded: “As evidenced by the increase in contract awards, we believe that 2018 marked the beginning of a recovery in the ultra-deepwater market. While oil prices remain volatile, the efficiencies that we have realized over the past few years have materially reduced offshore project costs and compressed the time to deliver first production thereby minimizing our customers’ risk and improving the attractiveness of offshore projects. In fact, current customer conversations suggest that FIDs in 2019 could increase materially over last year.”

Full Year 2018

For the year ended December 31, 2018, net loss attributable to controlling interest totaled $2.0 billion, or $4.27 per diluted share. Full year results included $1.6 billion, $3.48 per diluted share, of unfavorable items as follows:

  • $1.5 billion, $3.13 per diluted share, loss on impairment of goodwill and eight floaters previously announced for retirement;
  • $143 million, $0.30 per diluted share, in discrete tax expense;
  • $34 million, $0.07 per diluted share, in acquisition costs; and
  • $3 million, or $0.01 per diluted share, related to other unfavorable items.

These unfavorable items were partially offset by:

  • $10 million, $0.02 per diluted share, bargain purchase gain; and
  • $7 million, $0.01 per diluted share, gain on disposal of assets.

After excluding these net unfavorable items, adjusted net loss for 2018 was $369 million, or $0.79 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 48 mobile offshore drilling units consisting of 31 ultra-deepwater floaters, 13 harsh environment floaters and four midwater floaters. In addition, Transocean is constructing four ultra-deepwater drillships and one harsh environment semisubmersible in which the company holds a 33.0% interest.

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 Tuesday, February 19, 2019, to discuss the results. To participate, dial +1 323-994-2093 and refer to conference code 4397725 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 19, 2019. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 4397725 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 timing and likelihood of the completion of the contemplated acquisition of Ocean Rig UDW Inc. (“Ocean Rig”), the expected benefits from the transaction, the ability to successfully integrate the Transocean and Ocean Rig businesses, the success of our business following the acquisition of Songa Offshore SE (“Songa”), 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.”

Analyst Contacts:

Bradley Alexander
+1 713-232-7515

Lexington May
+1 832-587-6515

Media Contact:
Pam Easton
+1 713-232-7647

 
 
 
 
TRANSOCEAN LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share data)
(Unaudited)


  Years ended December 31, 
  2018   2017   2016
                 
                 
Contract drilling revenues (1) $ 3,018   $ 2,731   $ 3,705
Other revenues       242     456
    3,018     2,973     4,161
Costs and expenses                
Operating and maintenance   1,799     1,389     1,901
Depreciation   818     832     893
General and administrative   188     156     172
    2,805     2,377     2,966
Loss on impairment   (1,464)     (1,498)     (93)
Gain (loss) on disposal of assets, net       (1,603)     4
Operating income (loss)   (1,251)     (2,505)     1,106
                 
Other income (expense), net                
Interest income   53     43     20
Interest expense, net of amounts capitalized   (620)     (491)     (409)
Gain (loss) on retirement of debt   (3)     (55)     148
Other, net   46     5     69
    (524)     (498)     (172)
Income (loss) before income tax expense (benefit)   (1,775)     (3,003)     934
Income tax expense   228     94     107
                 
Net income (loss)   (2,003)     (3,097)     827
Net income (loss) attributable to noncontrolling interest   (7)     30     49
Net income (loss) attributable to controlling interest $ (1,996)   $ (3,127)   $ 778
                 
Earnings (loss) per share                
Basic $ (4.27)   $ (8.00)   $ 2.08
Diluted $ (4.27)   $ (8.00)   $ 2.08
                 
Weighted-average shares outstanding                
Basic   468     391     367
Diluted   468     391     367

___________________________________

(1) Contract drilling revenues, in the three months and year ended December 31, 2018, includes revenues of (a) $12 million and $124 million, respectively, resulting from contract early terminations and cancellations, (b) $36 million and $130 million, respectively, from customer reimbursements and (c) a reduction of $34 million and $112 million, respectively, resulting from the amortization of contract intangible assets.

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


  December 31, 
  2018   2017
           
Assets          
Cash and cash equivalents $ 2,160   $ 2,519
Short-term investments       450
Accounts receivable, net   604     596
Materials and supplies, net   474     418
Restricted cash accounts and investments   551     466
Other current assets   159     157
Total current assets   3,948     4,606
           
Property and equipment   25,811     22,693
Less accumulated depreciation   (5,403)     (5,291)
Property and equipment, net   20,408     17,402
Contract intangible assets   795    
Deferred income taxes, net   66     47
Other assets   448     355
Total assets $ 25,665   $ 22,410
           
Liabilities and equity          
Accounts payable $ 269   $ 201
Accrued income taxes   70     79
Debt due within one year   373     250
Other current liabilities   746     839
Total current liabilities   1,458     1,369
           
Long-term debt   9,605     7,146
Deferred income taxes, net   64     44
Other long-term liabilities   1,424     1,082
Total long-term liabilities   11,093     8,272
           
Commitments and contingencies          
Redeemable noncontrolling interest       58
Shares, CHF 0.10 par value, 638,285,574 authorized, 143,754,246 conditionally authorized, 610,581,677 issued and 609,649,291  outstanding at December 31, 2018, and 417,060,033 authorized, 143,783,041 conditionally authorized, 394,801,990 issued and 391,237,308 outstanding at December 31, 2017   59     37
Additional paid-in capital   13,394     11,031
Retained earnings (accumulated deficit)   (67)     1,929
Accumulated other comprehensive loss   (279)     (290)
Total controlling interest shareholders’ equity   13,107     12,707
Noncontrolling interest   7     4
Total equity   13,114     12,711
Total liabilities and equity $ 25,665   $ 22,410




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


  Years ended December 31, 
  2018   2017   2016
                 
Cash flows from operating activities                
Net income (loss) $ (2,003)   $ (3,097)   $ 827
Adjustments to reconcile to net cash provided by operating activities:                
Contract intangible asset amortization   112        
Depreciation   818     832     893
Share-based compensation expense   45     41     42
Loss on impairment   1,464     1,498     93
(Gain) loss on disposal of assets, net       1,603     (4)
(Gain) loss on retirement of debt   3     55     (148)
Deferred income tax expense (benefit)   (16)     89     68
Other, net   6     55     14
Changes in deferred revenues, net   (139)     33     219
Changes in deferred costs, net   34     54     72
Changes in other operating assets and liabilities, net   234     7     (96)
Net cash provided by operating activities   558     1,170     1,980
                 
Cash flows from investing activities                
Capital expenditures   (184)     (497)     (1,344)
Proceeds from disposal of assets, net   43     350     30
Cash paid in business combinations, net of cash acquired   (883)        
Investment in unconsolidated affiliates   (107)        
Proceeds from maturities of unrestricted and restricted short-term investments   507        
Deposits into unrestricted and restricted short-term investments   (173)     (450)    
Other, net       10     1
Net cash used in investing activities   (797)     (587)     (1,313)
                 
Cash flows from financing activities                
Proceeds from issuance of debt, net of discounts and issue costs   2,054     1,144     2,401
Repayments of debt   (2,105)     (2,284)     (2,295)
Proceeds from investments restricted for financing activities   26     102     100
Payments to terminate derivative instruments   (92)        
Distributions to holders of noncontrolling interest           (30)
Other, net   (30)     (3)    
Net cash provided by (used in) financing activities   (147)     (1,041)     176
                 
Net increase (decrease) in unrestricted and restricted cash and cash equivalents   (386)     (458)     843
Unrestricted and restricted cash and cash equivalents, beginning of period   2,975     3,433     2,590
Unrestricted and restricted cash and cash equivalents, end of period $ 2,589   $ 2,975   $ 3,433




                             
                             
                             
TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS
                             
                             
  Three months ended   Years ended
  December 31,    September 30,   December 31,    December 31,    December 31, 
Contract Drilling Revenues (1) (in millions) 2018   2018   2017   2018   2017
Contract drilling revenues                            
Ultra-deepwater floaters $ 457   $ 482   $ 404   $ 1,787   $ 1,917
Harsh environment floaters   253     265     105     974     437
Deepwater floaters   18     36     37     124     143
Midwater floaters   17     19     17     75     66
High-specification jackups   3     14     26     58     168
Total contract drilling revenues   748     816     589     3,018     2,731
                             
Other revenues                            
Customer early termination fees           25         201
Customer reimbursement revenues and other           15         41
Total other revenues           40         242
Total revenues $ 748   $ 816   $ 629   $ 3,018   $ 2,973


  Three months ended   Years ended
  December 31,    September 30,   December 31,    December 31,    December 31, 
Average Daily Revenue (2) 2018   2018   2017   2018   2017
Ultra-deepwater floaters $ 337,100   $ 340,500   $ 440,000   $ 356,700   $ 472,400
Harsh environment floaters   290,500     309,000     202,900     296,400     235,900
Deepwater floaters   154,500     195,700     202,400     186,700     195,200
Midwater floaters   90,800     98,500     90,300     99,900     95,600
High-specification jackups   314,300     145,700     145,500     152,900     143,900
Total drilling fleet $ 293,100     295,000   $ 296,700   $ 296,200   $ 321,300


  Three months ended   Years ended
  December 31,    September 30,   December 31,    December 31,    December 31, 
Utilization (3) 2018   2018   2017   2018   2017
Ultra-deepwater floaters 54 %   56 %   39 %   48 %   39 %
Harsh environment floaters 82 %   83 %   80 %   82 %   73 %
Deepwater floaters 67 %   100 %   100 %   93 %   73 %
Midwater floaters 50 %   43 %   50 %   41 %   38 %
High-specification jackups 100 %   100 %   100 %   97 %   61 %
Total drilling fleet 62 %   65 %   53 %   59 %   48 %


  Three months ended   Years ended
  December 31,    September 30,   December 31,    December 31,    December 31, 
Revenue Efficiency (4) 2018   2018   2017   2018   2017
Ultra-deepwater floaters  99    95    91    96    96 %
Harsh environment floaters  91    95    95    94    96 %
Deepwater floaters  91    96    96    94    94 %
Midwater floaters  96    98    96    98    96 %
High-specification jackups  100    99    99    100    101 %
Total drilling fleet  96    95    92    95    96 %
                             
(1) Contract drilling revenues, in the three months and year ended December 31, 2018, includes revenues of (a) $12 million and $124 million, respectively, resulting from contract early terminations and cancellations, (b) $36 million and $130 million, respectively, from customer reimbursement and (c) a reduction of $34 million and $112 million, 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   QTD   YTD   QTD   YTD
  12/31/18   12/31/18   09/30/18   09/30/18   06/30/18   06/30/18   03/31/18
Adjusted Net Income (Loss)                                        
Net loss attributable to controlling interest, as reported $ (1,996)   $ (242)   $ (1,754)   $ (409)   $ (1,345)   $ (1,135)   $ (210)
Acquisition and restructuring costs   34     12     22     4     18     11     7
Bargain purchase gain   (10)     (10)                    
Loss on impairment of goodwill and other assets   1,464     18     1,446     432     1,014     1,014    
(Gain) loss on disposal of assets, net   (7)     (1)     (6)     1     (7)     (1)     (6)
Loss on retirement of debt   3         3     1     2     2    
Discrete tax items and other, net   143     52     91     1     90     91     (1)
Net income (loss), as adjusted $ (369)   $ (171)   $ (198)   $ 30   $ (228)   $ (18)   $ (210)
                                         
Adjusted Diluted Earnings (Loss) Per Share:                                        
Diluted loss per share, as reported $ (4.27)   $ (0.48)   $ (3.86)   $ (0.88)   $ (2.99)   $ (2.46)   $ (0.48)
Acquisition and restructuring costs   0.07     0.02     0.05     0.01     0.05     0.03     0.02
Bargain purchase gain   (0.02)     (0.02)                    
Loss on impairment of goodwill and other assets   3.13     0.03     3.18     0.93     2.26     2.19    
Gain on disposal of assets, net   (0.01)         (0.02)         (0.02)         (0.02)
Loss on retirement of debt   0.01         0.01                
Discrete tax items and other, net   0.30     0.11     0.20         0.20     0.20    
Diluted earnings (loss) per share, as adjusted $ (0.79)   $ (0.34)   $ (0.44)   $ 0.06   $ (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, DEPRECIATION AND AMORTIZATION AND RELATED MARGINS  
(In millions, except percentages)  
                                           
                                           
  YTD   QTD   YTD   QTD   YTD   QTD   YTD  
  12/31/18   12/31/18   09/30/18   09/30/18   06/30/18   06/30/18   03/31/18  
                                           
Contract drilling revenues $ 3,018   $ 748   $ 2,270   $ 816   $ 1,454   $ 790   $ 664  
Contract intangible amortization   112     34     78     29     49     30     19  
Contract drilling revenues before amortization   3,130     782     2,348     845     1,503     820     683  
Drilling contract termination fees   (124)     (12)     (112)     (37)     (75)     (37)     (38)  
Adjusted Normalized Revenues $ 3,006   $ 770   $ 2,236   $ 808   $ 1,428   $ 783   $ 645  
                                           
Net loss $ (2,003)   $ (243)   $ (1,760)   $ (409)   $ (1,351)   $ (1,139)   $ (212)  
Interest expense, net of interest income   567     148     419     149     270     135     135  
Income tax expense (benefit)   228     110     118     (30)     148     85     63  
Depreciation expense   818     204     614     201     413     211     202  
Contract intangible amortization   112     34     78     29     49     30     19  
EBITDA   (278)     253     (531)     (60)     (471)     (678)     207  
                                           
Acquisition and restructuring costs   34     12     22     4     18     11     7  
Loss on impairment of goodwill and other assets   1,464     18     1,446     432     1,014     1,014      
Bargain purchase gain   (10)     (10)                      
(Gain) loss on disposal of assets, net   (7)     (1)     (6)     1     (7)     (1)     (6)  
Loss on retirement of debt   3         3     1     2     2      
Adjusted EBITDA   1,206     272     934     378     556     348     208  
                                           
Drilling contract termination fees   (124)     (12)     (112)     (37)     (75)     (37)     (38)  
Adjusted Normalized EBITDA $ 1,082   $ 260   $ 822   $ 341   $ 481   $ 311   $ 170  
                                           
EBITDA margin   (9) %   32 %   (23) %   (7) %   (31) %   (83) %   30 %
Adjusted EBITDA margin   39 %   35 %   40 %   45 %   37 %   42 %   30 %
Adjusted Normalized EBITDA margin   36 %   34 %   37 %   42 %   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   Year ended  
  December 31,    September 30,   December 31,    December 31,    December 31,   
  2018   2018   2017   2018   2017  
Loss before income taxes $ (133)   $ (439)   $ (111)   $ (1,775)   $ (3,003)  
Litigation matters           (2)         (8)  
Acquisition and restructuring costs   12     4     1     34     7  
Bargain purchase gain   (10)             (10)      
Loss on impairment of goodwill and other assets   18     432         1,464     1,498  
(Gain) loss on disposal of assets, net   (1)     1     (6)     (7)     1,590  
Loss on retirement of debt       1     6     3     55  
Adjusted income (loss) before income taxes $ (114)   $ (1)   $ (112)   $ (291)   $ 139  
                               
Income tax expense (benefit) $ 110   $ (30)   $ (9)   $ 228   $ 94  
Litigation matters           (1)          
Acquisition and restructuring costs                   1  
Bargain purchase gain                    
Loss on impairment of goodwill and other assets           2         1  
(Gain) loss on disposal of assets, net                    
Changes in estimates (1)   (52)     (1)     (20)     (143)     37  
Adjusted income tax expense (benefit) (2) $ 58   $ (31)   $ (28)   $ 85   $ 133  
                               
Effective Tax Rate (3)    (82.6)    6.7    8.3    (12.8)    (3.1) %
                               
Effective Tax Rate, excluding discrete items (4)    (50.5)    2,757.6    25.4    (29.2)    95.2 %
                               
                               
(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, 2018 included $24 million of additional tax expense, reflecting the cumulative effect of an increase 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 related to estimating the annual effective tax rate.  
                               

Transocean Ltd.