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Transocean Ltd. Reports Third Quarter 2019 Results

October 28, 2019
  • Total contract drilling revenues were $784 million (total adjusted contract drilling revenues of $832 million), compared with $758 million in the second quarter of 2019 (total adjusted contract drilling revenues of $805 million);
  • Revenue efficiency(1) was 97.0%, compared with 97.8% in the prior quarter;
  • Operating and maintenance expense was $547 million, compared with $510 million in the previous quarter;
  • Net loss attributable to controlling interest was $825 million, $1.35 per diluted share, compared with net loss attributable to controlling interest of $208 million, $0.34 per diluted share, in the second quarter of 2019;
  • Adjusted net loss was $234 million, $0.38 per diluted share, excluding $591 million of net unfavorable items. This compares with adjusted net loss of $209 million, $0.34 per diluted share, in the prior quarter;
  • Adjusted EBITDA was $245 million, compared with adjusted EBITDA of $257 million in the prior quarter; and
  • Contract backlog was $10.8 billion as of the October 2019 Fleet Status Report.

STEINHAUSEN, Switzerland, Oct. 28, 2019 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE: RIG) today reported net loss attributable to controlling interest of $825 million, $1.35 per diluted share, for the three months ended September 30, 2019.

Third quarter 2019 results included net unfavorable items of $591 million, or $0.97 per diluted share, as follows:

  • $583 million, $0.96 per diluted share, loss on impairment primarily for three floaters previously announced for retirement,
  • $12 million, $0.02 per diluted share, loss on retirement of debt; and
  • $6 million, $0.01 per diluted share, loss on disposal of assets.

These unfavorable items were partially offset by:

  • $10 million, $0.02 per diluted share, related to discrete tax items.

After consideration of these net unfavorable items, third quarter 2019 adjusted net loss was $234 million, or $0.38 per diluted share.

Contract drilling revenues for the three months ended September 30, 2019, sequentially increased $26 million, primarily due to the commencement of operations of the newbuild harsh environment floater Transocean Norge. The quarter was also favorably impacted by increased fleet utilization and an additional operating day. These increases were partially offset by increased shipyard days.

The third quarter included a non-cash revenue reduction of $48 million, compared to $47 million in the second quarter, from contract intangible amortization associated with the Songa and Ocean Rig acquisitions.

Operating and maintenance expense was $547 million, compared with $510 million in the prior quarter. The sequential increase was the result of higher shipyard costs and contract preparation related to the reactivation of the ultra-deepwater drillships Deepwater Corcovado and Deepwater Mykonos, and the commencement of operations of the newbuild Transocean Norge.

General and administrative expense was $45 million, in line with the second quarter.

Interest expense, net of amounts capitalized, was $166 million, compared with $168 million in the prior quarter and capitalized interest sequentially increased $1 million to $10 million. Interest income was $11 million, compared with $12 million in the prior quarter.

The Effective Tax Rate(2) was (6.9)%, up from (21.9)% in the prior quarter. The increase was primarily due to impairment losses in jurisdictions with no tax benefit. This was partially offset by a decrease to tax expense related to settlements of various uncertain tax positions. The Effective Tax Rate excluding discrete items was (37.5)% compared to (25.4)% in previous quarter.

Cash flows provided by operating activities were $91 million, compared to $153 million in the prior quarter. The third quarter decrease was primarily due to reduced collections of customer receivables, and the timing of interest payments.

Third quarter 2019 capital expenditures of $121 million were related to the company’s newbuild drillships under construction at the Jurong shipyard along with capital upgrades for certain rigs in our fleet. This compares with $86 million in the previous quarter.

“In the third quarter, the Transocean team continued to operate at a high level for our customers and our shareholders,” said President and Chief Executive Officer Jeremy Thigpen. “Driven by strong uptime performance across our global fleet, we delivered revenue efficiency of 97%, resulting in an Adjusted EBITDA Margin of 29%.”

Thigpen added, “As we approach the end of the year, we will remain focused on exceeding our customers’ performance expectations. We continue to become more encouraged by our current and future prospects and our increasing level of tender participation. We are gaining improved visibility to additional opportunities in the harsh environment market of Norway; along with escalating interest in our fleet of high-specification ultra-deepwater assets for upcoming projects in the Gulf of Mexico, Brazil and West Africa.”

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 Contract Drilling Revenues, EBITDA, Adjusted EBITDA and Adjusted Net Income, 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 45 mobile offshore drilling units consisting of 28 ultra-deepwater floaters, 14 harsh environment floaters and three midwater floaters. In addition, Transocean is constructing two ultra-deepwater drillships.

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

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EDT, 2 p.m. CET, on Tuesday, October 29, 2019, to discuss the results. To participate, dial +1 334-777-6978 and refer to conference code 6385237 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,5 p.m. CET, on October 29, 2019. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 6385237 and pin 3332. 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 ability to successfully integrate the Transocean and Ocean Rig businesses, the success of our business following the acquisition of Ocean Rig UDW Inc. (“Ocean Rig”) and 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, 2018, 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)


    Three months ended   Nine months ended  
    September 30,    September 30,   
    2019     2018     2019     2018    
                           
Contract drilling revenues   $  784     $  816     $  2,296     $  2,270    
                           
Costs and expenses                          
Operating and maintenance      547        447        1,565        1,302    
Depreciation and amortization      212        201        648        614    
General and administrative      45        35        139        134    
       804        683        2,352        2,050    
Loss on impairment      (583 )      (432 )      (584 )      (1,446 )  
Loss on disposal of assets, net      (4 )      (6 )      (7 )      —    
Operating loss      (607 )      (305 )      (647 )      (1,226 )  
                           
Other income (expense), net                          
Interest income      11        11        33        36    
Interest expense, net of amounts capitalized      (166 )      (160 )      (500 )      (455 )  
Loss on retirement of debt      (12 )      (1 )      (39 )      (3 )  
Other, net      3        16        34        6    
       (164 )      (134 )      (472 )      (416 )  
Loss before income tax expense      (771 )      (439 )      (1,119 )      (1,642 )  
Income tax expense (benefit)      54        (30 )      83        118    
                           
Net loss      (825 )      (409 )      (1,202 )      (1,760 )  
Net income (loss) attributable to noncontrolling interest      —        —        2        (6 )  
Net loss attributable to controlling interest   $  (825 )   $  (409 )   $  (1,204 )   $  (1,754 )  
                           
Loss per share                          
Basic   $  (1.35 )   $  (0.88 )   $  (1.97 )   $  (3.86 )  
Diluted   $  (1.35 )   $  (0.88 )   $  (1.97 )   $  (3.86 )  
                           
Weighted-average shares outstanding                          
Basic      613        463        612        454    
Diluted      613        463        612        454    


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


               
    September 30,    December 31,   
    2019     2018    
               
Assets              
Cash and cash equivalents   $  1,906     $  2,160    
Accounts receivable, net of allowance for doubtful accounts              
of less than $1 at December 31, 2018      639        604    
Materials and supplies, net of allowance for obsolescence              
of $123 and $134 at September 30, 2019 and December 31, 2018, respectively      475        474    
Restricted cash accounts and investments      551        551    
Other current assets      200        159    
Total current assets      3,771        3,948    
               
Property and equipment      24,203        25,811    
Less accumulated depreciation      (5,255 )      (5,403 )  
Property and equipment, net      18,948        20,408    
Contract intangible assets      655        795    
Deferred income taxes, net      21        66    
Other assets      1,054        448    
Total assets   $  24,449     $  25,665    
               
Liabilities and equity              
Accounts payable   $  308     $  269    
Accrued income taxes      35        70    
Debt due within one year      349        373    
Other current liabilities      797        746    
Total current liabilities      1,489        1,458    
               
Long-term debt      9,041        9,605    
Deferred income taxes, net      193        64    
Other long-term liabilities      1,784        1,424    
Total long-term liabilities      11,018        11,093    
               
Commitments and contingencies              
               
Shares, CHF 0.10 par value, 639,674,422 authorized, 142,365,398 conditionally authorized, 617,970,525 issued              
and 611,849,468  outstanding at September 30, 2019, and 638,285,574 authorized, 143,754,246 conditionally              
authorized, 610,581,677 issued and 609,649,291 outstanding at December 31, 2018      59        59    
Additional paid-in capital      13,415        13,394    
Accumulated deficit      (1,246 )      (67 )  
Accumulated other comprehensive loss      (295 )      (279 )  
Total controlling interest shareholders’ equity      11,933        13,107    
Noncontrolling interest      9        7    
Total equity      11,942        13,114    
Total liabilities and equity   $  24,449     $  25,665    




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


               
    Nine months ended  
    September 30,   
    2019     2018    
Cash flows from operating activities              
Net loss   $  (1,202 )   $  (1,760 )  
Adjustments to reconcile to net cash provided by operating activities:              
Contract intangible asset amortization      140        78    
Depreciation and amortization      648        614    
Share-based compensation expense      28        36    
Loss on impairment      584        1,446    
Loss on disposal of assets, net      7        —    
Loss on retirement of debt      39        3    
Deferred income tax expense      139        50    
Other, net      28        12    
Changes in deferred revenues, net      19        (127 )  
Changes in deferred costs, net      (21 )      23    
Changes in other operating assets and liabilities, net      (216 )      (55 )  
Net cash provided by operating activities      193        320    
               
Cash flows from investing activities              
Capital expenditures      (259 )      (140 )  
Proceeds from disposal of assets, net      52        37    
Investments in unconsolidated affiliates      (77 )      (107 )  
Unrestricted and restricted cash acquired in business combination      —        131    
Proceeds from maturities of unrestricted and restricted investments      123        500    
Deposits to unrestricted investments      —        (50 )  
Other, net      3        —    
Net cash provided by (used in) investing activities      (158 )      371    
               
Cash flows from financing activities              
Proceeds from issuance of debt, net of discount and issue costs      1,056        1,319    
Repayments of debt      (1,189 )      (2,015 )  
Proceeds from investments restricted for financing activities      —        26    
Payments to terminate derivative instruments      —        (92 )  
Other, net      (34 )      (29 )  
Net cash used in financing activities      (167 )      (791 )  
               
Net decrease in unrestricted and restricted cash and cash equivalents      (132 )      (100 )  
Unrestricted and restricted cash and cash equivalents, beginning of period      2,589        2,975    
Unrestricted and restricted cash and cash equivalents, end of period   $  2,457     $  2,875    




                                 
TRANSOCEAN LTD. AND SUBSIDIARIES  
FLEET OPERATING STATISTICS  
                                 
                                 
    Three months ended   Nine months ended  
    September 30,    June 30,   September 30,    September 30,    September 30,   
Contract Drilling Revenues (in millions)   2019   2019   2018   2019   2018  
Contract drilling revenues                                
Ultra-deepwater floaters   $  494   $  486   $  482   $  1,455   $  1,330  
Harsh environment floaters      281      251      265      790      721  
Deepwater floaters      —      1      36      8      106  
Midwater floaters      9      20      19      43      58  
High-specification jackups      —      —      14      —      55  
Total contract drilling revenues   $  784   $  758   $  816   $  2,296   $  2,270  


                                 
                                 
    Three months ended   Nine months ended  
    September 30,    June 30,   September 30,    September 30,    September 30,   
Average Daily Revenue (1)   2019   2019   2018   2019   2018  
Ultra-deepwater floaters   $  339,400   $  335,400   $  340,500   $  338,200   $  364,500  
Harsh environment floaters      298,300      301,700      309,000      295,300      298,500  
Deepwater floaters      —      —      195,700      —      193,000  
Midwater floaters      106,200      163,700      98,500      118,100      103,000  
High-specification jackups      —      —      145,700      —      149,100  
Total drilling fleet   $  314,500      314,900   $  295,000   $  312,000   $  297,300  


                                 
                                 
    Three months ended   Nine months ended  
    September 30,    June 30,   September 30,    September 30,    September 30,   
Utilization (2)   2019   2019   2018   2019   2018  
Ultra-deepwater floaters    51    50    56    49    46 %  
Harsh environment floaters    79    76    83    78    83 %  
Deepwater floaters    —    —    100    —    100 %  
Midwater floaters    33    39    43    38    38 %  
High-specification jackups    —    —    100    —    97 %  
Total drilling fleet    58    56    65    57    58 %  


                                 
                                 
      Three months ended   Nine months ended
      September 30,    June 30,   September 30,    September 30,    September 30, 
Revenue Efficiency (3)     2019   2019   2018   2019   2018
Ultra-deepwater floaters      98    98    95    99    95 %
Harsh environment floaters      96    95    95    95    95 %
Deepwater floaters      —    —    96    —    94 %
Midwater floaters      79    130    98    102    98 %
High-specification jackups      —    —    99    —    100 %
Total drilling fleet      97    98    95    98    95 %
                                 
                                 
(1) Average daily revenue is defined as contract drilling revenues earned per operating day. An operating day is defined as a calendar day during which a rig
is contracted to earn a dayrate during the firm contract period after commencement of operations.
                                 
(2) Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed
as a percentage.
                                 
(3) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation for the measurement
period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the
measurement period, excluding amounts related to incentive provisions.
                                 

                                                                                                                                                                                                                                                                                                                                                                                                                                               

TRANSOCEAN LTD. AND SUBSIDIARIES  
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS  
ADJUSTED NET INCOME (LOSS) AND ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE  
(In millions, except per share data)  
                                             
                                             
            YTD   QTD   YTD   QTD   YTD  
            09/30/19   09/30/19   06/30/19   06/30/19   03/31/19  
Adjusted Net Loss                                            
Net loss attributable to controlling interest, as reported               $  (1,204 )   $  (825 )   $  (379 )   $  (208 )   $  (171 )  
Acquisition and restructuring costs                  1        —        1        1        —    
Gain on bargain purchase                  (11 )      —        (11 )      (9 )      (2 )  
Loss on impairment of assets                  584        583        1        1        —    
(Gain) loss on disposal of assets, net                  7        6        1        2        (1 )  
Loss on retirement of debt                  39        12        27        9        18    
Discrete tax items and other, net                  (40 )      (10 )      (30 )      (5 )      (25 )  
Net loss, as adjusted               $  (624 )   $  (234 )   $  (390 )   $  (209 )   $  (181 )  
                                             
Adjusted Diluted Loss Per Share:                                            
Diluted loss per share, as reported               $  (1.97 )   $  (1.35 )   $  (0.62 )   $  (0.34 )   $  (0.28 )  
Acquisition and restructuring costs                  —        —        —        —        —    
Gain on bargain purchase                  (0.02 )      —        (0.02 )      (0.01 )      —    
Loss on impairment of assets                  0.97        0.96        —        —        —    
(Gain) loss on disposal of assets, net                  0.01        0.01        —        —        —    
Loss on retirement of debt                  0.06        0.02        0.05        0.01        0.03    
Discrete tax items and other, net                  (0.07 )      (0.02 )      (0.05 )      —        (0.05 )  
Diluted loss per share, as adjusted               $  (1.02 )   $  (0.38 )   $  (0.64 )   $  (0.34 )   $  (0.30 )  


                                             
    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    
Gain on bargain purchase      (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    
Gain on bargain purchase      (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) loss 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 )  




TRANSOCEAN LTD. AND SUBSIDIARIES  
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS  
ADJUSTED CONTRACT DRILLING REVENUES  
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION AND RELATED MARGINS  
(In millions, except percentages)  
                                             
                                             
            YTD   QTD   YTD   QTD   YTD  
            09/30/19   09/30/19   06/30/19   06/30/19   03/31/19  
                                             
Contract drilling revenues               $  2,296     $  784     $  1,512     $  758     $  754    
Contract intangible amortization                  140        48        92        47        45    
Adjusted Contract Drilling Revenues               $  2,436     $  832     $  1,604     $  805     $  799    
                                             
Net loss               $  (1,202 )   $  (825 )   $  (377 )   $  (206 )   $  (171 )  
Interest expense, net of interest income                  467        155        312        156        156    
Income tax expense (benefit)                  83        54        29        37        (8 )  
Depreciation and amortization                  648        212        436        219        217    
Contract intangible amortization                  140        48        92        47        45    
EBITDA                  136        (356 )      492        253        239    
                                             
Acquisition and restructuring costs                  1        —        1        1        —    
Loss on impairment of assets                  584        583        1        1        —    
(Gain) loss on disposal of assets, net                  7        6        1        2        (1 )  
Gain on bargain purchase                  (11 )      —        (11 )      (9 )      (2 )  
Loss on retirement of debt                  39        12        27        9        18    
Adjusted EBITDA               $  756     $  245     $  511     $  257     $  254    
                                             
                                             
EBITDA margin                  6   %    (43 ) %    31   %    31   %    30   %
Adjusted EBITDA margin                  31   %    29   %    32   %    32   %    32   %


                                             
    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 Contract Drilling 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        —    
Gain on bargain purchase      (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        —    
       1,206        272        934        378        556        348        208    
                                             
Drilling contract termination fees      (124 )      (12 )      (112 )      (37 )      (75 )      (37 )      (38 )  
Adjusted EBITDA   $  1,082     $  260     $  822     $  341     $  481     $  311     $  170    
                                             
EBITDA margin      (9 ) %    32   %    (23 ) %    (7 ) %    (31 ) %    (83 ) %    30   %
Adjusted EBITDA margin      36   %    34   %    37   %    42   %    34   %    40   %    26   %
                                             
                                             




                                 
                                 
TRANSOCEAN LTD. AND SUBSIDIARIES  
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS  
(In millions, except tax rates)  
                                 
                                 
    Three months ended   Nine months ended  
    September 30,    June 30,   September 30,    September 30,    September 30,   
    2019     2019     2018     2019     2018    
Loss before income taxes   $  (771 )   $  (169 )   $  (439 )   $  (1,119 )   $  (1,642 )  
Acquisition and restructuring costs      —        1        4        1        22    
Gain on bargain purchase      —        (9 )      —        (11 )      —    
Loss on impairment of goodwill and other assets      583        1        432        584        1,446    
(Gain) loss on disposal of assets, net      6        2        1        7        (6 )  
Loss on retirement of debt      12        9        1        39        3    
Adjusted loss before income taxes   $  (170 )   $  (165 )   $  (1 )   $  (499 )   $  (177 )  
                                 
Income tax expense (benefit)   $  54     $  37     $  (30 )   $  83     $  118    
Acquisition and restructuring costs      —        —        —        —        —    
Gain on bargain purchase      —        —        —        —        —    
Loss on impairment of goodwill and other assets      —        —        —        —        —    
(Gain) loss on disposal of assets, net      —        —        —        —        —    
Loss on retirement of debt      —        —        —        —        —    
Changes in estimates (1)      10        5        (1 )      40        (91 )  
Adjusted income tax expense (benefit) (2)   $  64     $  42     $  (31 )   $  123     $  27    
                                 
Effective Tax Rate (3)      (6.9 ) %    (21.9 ) %    6.7      (7.4 ) %    (7.2 ) %
                                 
Effective Tax Rate, excluding discrete items (4)      (37.5 ) %    (25.4 ) %    2,757.6   %    (24.7 ) %    (15.6 ) %
                                 
                                 
(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 September 30, 2019 included $22 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.  

 

Source: Transocean Ltd.