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Transocean Ltd. Reports Second Quarter 2020 Results

July 29, 2020
  • Total contract drilling revenues were $930 million (total adjusted contract drilling revenues of $983 million), compared with $759 million in the first quarter of 2020 (total adjusted contract drilling revenues of $807 million);
  • Revenue efficiency(1) was 97.2%, compared with 94.4% in the prior quarter;
  • Operating and maintenance expense was $525 million, compared with $540 million in the prior period;
  • Net loss attributable to controlling interest was $497 million, $0.81 per diluted share, compared with net loss attributable to controlling interest of $392 million, $0.64 per diluted share, in the first quarter of 2020;
  • Adjusted net loss was $1 million, excluding $496 million of net unfavorable items. This compares with adjusted net loss of $187 million, $0.30 per diluted share, in the previous quarter;
  • Adjusted EBITDA was $418 million, compared with adjusted EBITDA of $235 million in the prior quarter; and
  • Contract backlog was $8.9 billion as of the July 2020 Fleet Status Report.

STEINHAUSEN, Switzerland, July 29, 2020 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE: RIG) today reported a net loss attributable to controlling interest of $497 million, $0.81 per diluted share, for the three months ended June 30, 2020.

Second quarter 2020 results included net unfavorable items of $496 million, or $0.81 per diluted share, as follows:

  • $430 million, $0.70 per diluted share, loss on impairment of assets
  • $59 million, $0.10 per diluted share, loss on impairment of an investment in an unconsolidated affiliate
  • $10 million, $0.02 per diluted share, related to discrete tax items; and
  • $1 million in restructuring costs.

These unfavorable items were partially offset by:

  • $4 million, $0.01 per diluted share, gain on retirement of debt.

After consideration of these net unfavorable items, second quarter 2020 adjusted net loss was $1 million.

Contract drilling revenues for the three months ended June 30, 2020, increased sequentially by $171 million, primarily due to $177 million of revenues recognized in second quarter 2020, resulting from a settlement agreement with a customer for performance disputes.

Additionally, the second quarter was favorably impacted by higher revenue efficiency, and an early termination fee of $21 million for Paul B. Loyd Jr., offset by lower revenues due to reductions in dayrates and a non-cash revenue reduction of $53 million, compared to $48 million in the prior quarter, from contract intangible amortization associated with the Songa and Ocean Rig acquisitions.

Operating and maintenance expense was $525 million, compared with $540 million in the prior quarter. The sequential decrease was the result of lower in-service maintenance cost across our fleet, partially offset by $30 million of higher costs related to the COVID-19 pandemic.

General and administrative expense was $45 million, as compared to $43 million in the first quarter of 2020.

Interest expense, net of amounts capitalized, was $153 million, compared with $160 million, in the prior quarter. Interest income was $4 million, compared with $9 million in the previous quarter.

The Effective Tax Rate(2) was (6.8)%, down from 1.1% in the prior quarter. The decrease was primarily due to various discrete period tax items, including revenues recognized for settlement of disputes. The Effective Tax Rate excluding discrete items was (15.0)% compared to (9.5)% in previous quarter.

Net cash provided by (used in) operating activities were $87 million, compared to $(48) million in the prior quarter. The second quarter cash provided by operating activities increased primarily due to collections of certain receivables and decreased income tax payments.

Second quarter 2020 capital expenditures of $46 million decreased primarily due to reduced expenditures for our newbuild rigs under construction. This compares with $107 million in the previous quarter.

\"I recognize and thank the entire Transocean team for producing strong second quarter operating and financial results during these unprecedented times,\" said Jeremy Thigpen, President and Chief Executive Officer. \"Our revenue efficiency of 97% demonstrates our unwavering commitment to delivering reliable and efficient operations for our customers, while keeping personnel on our rigs safe and healthy.”

Thigpen added, “Furthermore, we are excited to have secured a contract, subject to a final investment decision by our customers, that will result in upgrading Deepwater Atlas into the industry’s second 20,000 PSI ultra-deepwater drillship. This contract is meaningful as it moves us closer towards securing backlog for our remaining newbuild drillship, and clearly demonstrates our customer’s confidence in Transocean as the undisputed leader in ultra-deepwater drilling.”

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 39 mobile offshore drilling units consisting of 27 ultra-deepwater floaters and 12 harsh environment 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, 3 p.m. CEST, on Thursday, July 30, 2020, to discuss the results. To participate, dial +1 334-777-6978 and refer to conference code 9017399 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 Thursday, July 30, 2020. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 9017399 and pin 5449. The replay will also be available on the company’s website.

Forward-Looking Statements

The statements described herein 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 could 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 fluctuation of current and future prices of oil and gas, the global and regional supply and demand for oil and gas, the intention to scrap certain drilling rigs, the success of our business following prior acquisitions, the effects of the spread of and mitigation efforts by governments, businesses and individuals related to contagious illnesses, such as COVID-19, 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, 2019, 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, excluding revenues for contract terminations and reimbursements, 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, excluding revenues for contract terminations and reimbursements, 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 divided by income 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   Six months ended  
    June 30   June 30  
    2020   2019   2020   2019  
                           
Contract drilling revenues   $  930     $  758     $  1,689     $  1,512    
                           
Costs and expenses                          
Operating and maintenance      525        510        1,065        1,018    
Depreciation and amortization      196        219        402        436    
General and administrative      45        45        88        94    
       766        774        1,555        1,548    
Loss on impairment      (429 )      (1 )      (597 )      (1 )  
Gain (loss) on disposal of assets, net      1        (10 )      —        (3 )  
Operating loss      (264 )      (27 )      (463 )      (40 )  
                           
Other income (expense), net                          
Interest income      4        12        13        22    
Interest expense, net of amounts capitalized      (153 )      (168 )      (313 )      (334 )  
Gain (loss) on retirement of debt      4        (9 )      (53 )      (27 )  
Other, net      (56 )      23        (44 )      31    
       (201 )      (142 )      (397 )      (308 )  
Loss before income tax expense      (465 )      (169 )      (860 )      (348 )  
Income tax expense      32        37        28        29    
                           
Net loss      (497 )      (206 )      (888 )      (377 )  
Net income attributable to noncontrolling interest      —        2        1        2    
Net loss attributable to controlling interest   $  (497 )   $  (208 )   $  (889 )   $  (379 )  
                           
Loss per share                          
Basic   $  (0.81 )   $  (0.34 )   $  (1.45 )   $  (0.62 )  
Diluted   $  (0.81 )   $  (0.34 )   $  (1.45 )   $  (0.62 )  
                           
Weighted-average shares outstanding                          
Basic      615        612        615        612    
Diluted      615        612        615        612    
                                   


 
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
               
    June 30   December 31,  
    2020   2019
 
               
Assets              
Cash and cash equivalents   $  1,511     $  1,790    
Accounts receivable, net of allowance of $2 at June 30, 2020      703        654    
Materials and supplies, net of allowance of $122 and $127 at June 30, 2020 and December 31, 2019, respectively      457        479    
Restricted cash accounts and investments      437        558    
Other current assets      176        159    
Total current assets      3,284        3,640    
               
Property and equipment      23,318        24,281    
Less accumulated depreciation      (5,309 )      (5,434 )  
Property and equipment, net      18,009        18,847    
Contract intangible assets      507        608    
Deferred income taxes, net      17        20    
Other assets      1,008        990    
Total assets   $  22,825     $  24,105    
               
Liabilities and equity              
Accounts payable   $  264     $  311    
Accrued income taxes      42        64    
Debt due within one year      578        568    
Other current liabilities      704        781    
Total current liabilities      1,588        1,724    
               
Long-term debt      8,480        8,693    
Deferred income taxes, net      294        266    
Other long-term liabilities      1,476        1,555    
Total long-term liabilities      10,250        10,514    
               
Commitments and contingencies              
               
Shares, CHF 0.10 par value, 824,648,925 authorized, 142,365,398 conditionally authorized, 639,674,414 issued              
and 614,612,545 outstanding at June 30, 2020, and 639,674,422 authorized, 142,365,398 conditionally              
authorized, 617,970,525 issued and 611,871,374 outstanding at December 31, 2019      60        59    
Additional paid-in capital      13,438        13,424    
Accumulated deficit      (2,188 )      (1,297 )  
Accumulated other comprehensive loss      (329 )      (324 )  
Total controlling interest shareholders’ equity      10,981        11,862    
Noncontrolling interest      6        5    
Total equity      10,987        11,867    
Total liabilities and equity   $  22,825     $  24,105    
                   


 
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
               
    Six months ended  
    June 30  
    2020   2019  
Cash flows from operating activities              
Net loss   $  (888 )   $  (377 )  
Adjustments to reconcile to net cash provided by operating activities:              
Contract intangible asset amortization      101        92    
Depreciation and amortization      402        436    
Share-based compensation expense      15        19    
Loss on impairment      597        1    
Loss on impairment of investment in unconsolidated affiliate      59        —    
Loss on disposal of assets, net      —        3    
Loss on retirement of debt      53        27    
Deferred income tax expense      30        109    
Other, net      32        11    
Changes in deferred revenues, net      (10 )      4    
Changes in deferred costs, net      (4 )      (6 )  
Changes in other operating assets and liabilities, net      (348 )      (217 )  
Net cash provided by operating activities      39        102    
               
Cash flows from investing activities              
Capital expenditures      (153 )      (138 )  
Proceeds from disposal of assets, net      3        40    
Investments in unconsolidated affiliates      (6 )      (62 )  
Proceeds from maturities of unrestricted and restricted investments      —        123    
Other, net      —        3    
Net cash used in investing activities      (156 )      (34 )  
               
Cash flows from financing activities              
Proceeds from issuance of debt, net of discounts and issue costs      743        1,056    
Repayments of debt      (1,009 )      (834 )  
Other, net      (18 )      (26 )  
Net cash provided by (used in) financing activities      (284 )      196    
               
Net increase (decrease) in unrestricted and restricted cash and cash equivalents      (401 )      264    
Unrestricted and restricted cash and cash equivalents, beginning of period      2,349        2,589    
Unrestricted and restricted cash and cash equivalents, end of period   $  1,948     $  2,853    
                   


                                 
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 (in millions)   2020   2020   2019   2020   2019  
Contract drilling revenues                                
Ultra-deepwater floaters   $  636   $  528   $  486   $  1,164   $  962  
Harsh environment floaters      293      220      251      513      509  
Deepwater floaters      —      —      1      —      7  
Midwater floaters      1      11      20      12      34  
Total contract drilling revenues   $  930   $  759   $  758   $  1,689   $  1,512  


                                 
    Three months ended   Six months ended  
    June 30   March 31,   June 30   June 30   June 30  
Average Daily Revenue (1)   2020   2020   2019   2020   2019  
Ultra-deepwater floaters   $  296,500   $  332,600   $  335,400   $  314,800   $  337,600  
Harsh environment floaters      331,900      303,100      301,700      317,000      293,700  
Midwater floaters      99,400      112,600      163,700      111,400      122,200  
Total drilling fleet   $  307,800      314,900   $  314,900   $  311,300   $  310,700  


                                 
    Three months ended   Six months ended  
    June 30   March 31,   June 30   June 30   June 30  
Utilization (2)   2020   2020   2019   2020   2019  
Ultra-deepwater floaters    61 %    61 %    50 %    61    48 %  
Harsh environment floaters    80 %    63 %    76 %    71    78 %  
Midwater floaters    25 %    39 %    39 %    37    40 %  
Total drilling fleet    66 %    60 %    56 %    63    56 %  


                                 
      Three months ended   Six months ended
      June 30   March 31,   June 30   June 30   June 30
Revenue Efficiency (3)     2020   2020   2019   2020   2019
Ultra-deepwater floaters      98 %    97 %    98 %    98 %    99 %
Harsh environment floaters      97 %    89 %    95 %    93 %    95 %
Midwater floaters      79 %    87 %    130 %    86 %    111 %
Total drilling fleet      97 %    94 %    98 %    96 %    98 %
                                 
                                 
(1) Average daily revenue is defined as contract drilling revenues, excluding revenues for contract terminations, reimbursements and contract intangible amortization, 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 rig calendar days in the measurement period, expressed as a percentage.
                                 
(3) Revenue efficiency is defined as actual contract drilling revenues, excluding revenues for contract terminations and reimbursements, 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, excluding revenues for contract terminations and reimbursements, 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  
    06/30/20   06/30/20   03/31/20  
Adjusted Net Loss                    
Net loss attributable to controlling interest, as reported   $  (889 )   $  (497 )   $  (392 )  
Restructuring costs      1        1        —    
Loss on impairment of investment in unconsolidated affiliate      59        59        —    
Loss on impairment of assets      597        430        167    
(Gain) loss on retirement of debt      53        (4 )      57    
Discrete tax items      (9 )      10        (19 )  
Net loss, as adjusted   $  (188 )   $  (1 )   $  (187 )  
                     
Adjusted Diluted Loss Per Share:                    
Diluted loss per share, as reported   $  (1.45 )   $  (0.81 )   $  (0.64 )  
Restructuring costs      —        —        —    
Loss on impairment of investment in unconsolidated affiliate      0.10        0.10        —    
Loss on impairment of assets      0.97        0.70        0.28    
(Gain) loss on retirement of debt      0.09        (0.01 )      0.09    
Discrete tax items      (0.02 )      0.02        (0.03 )  
Diluted loss per share, as adjusted   $  (0.31 )   $  —     $  (0.30 )  


                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
    12/31/19   12/31/19   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   $  (1,255 )   $  (51 )   $  (1,204 )   $  (825 )   $  (379 )   $  (208 )   $  (171 )  
Acquisition and restructuring costs      6        5        1        —        1        1        —    
Gain on bargain purchase      (11 )      —        (11 )      —        (11 )      (9 )      (2 )  
Loss on impairment of assets      609        25        584        583        1        1        —    
(Gain) loss on disposal of assets, net      5        (2 )      7        6        1        2        (1 )  
Gain on terminated construction contracts      (132 )      (132 )      —        —        —        —        —    
Loss on retirement of debt      41        2        39        12        27        9        18    
Discrete tax items and other, net      (150 )      (110 )      (40 )      (10 )      (30 )      (5 )      (25 )  
Net loss, as adjusted   $  (887 )   $  (263 )   $  (624 )   $  (234 )   $  (390 )   $  (209 )   $  (181 )  
                                             
Adjusted Diluted Loss Per Share:                                            
Diluted loss per share, as reported   $  (2.05 )   $  (0.08 )   $  (1.97 )   $  (1.35 )   $  (0.62 )   $  (0.34 )   $  (0.28 )  
Acquisition and restructuring costs      0.01        0.01        —        —        —        —        —    
Gain on bargain purchase      (0.02 )      —        (0.02 )      —        (0.02 )      (0.01 )      —    
Loss on impairment of assets      0.99        0.04        0.97        0.96        —        —        —    
(Gain) loss on disposal of assets, net      0.01        —        0.01        0.01        —        —        —    
Gain on terminated construction contracts      (0.22 )      (0.22 )      —        —        —        —        —    
Loss on retirement of debt      0.07        —        0.06        0.02        0.05        0.01        0.03    
Discrete tax items and other, net      (0.24 )      (0.18 )      (0.07 )      (0.02 )      (0.05 )      —        (0.05 )  
Diluted loss per share, as adjusted   $  (1.45 )   $  (0.43 )   $  (1.02 )   $  (0.38 )   $  (0.64 )   $  (0.34 )   $  (0.30 )  



                     
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  
    06/30/20   06/30/20   03/31/20  
                     
Contract drilling revenues   $  1,689     $  930     $  759    
Contract intangible amortization      101        53        48    
Adjusted Contract Drilling Revenues   $  1,790     $  983     $  807    
                     
Net loss   $  (888 )   $  (497 )   $  (391 )  
Interest expense, net of interest income      300        149        151    
Income tax expense (benefit)      28        32        (4 )  
Depreciation and amortization      402        196        206    
Contract intangible amortization      101        53        48    
EBITDA      (57 )      (67 )      10    
                     
Restructuring costs      1        1        —    
Loss on impairment of assets      597        429        168    
(Gain) loss on retirement of debt      53        (4 )      57    
Loss on impairment of investment in unconsolidated affiliate      59        59        —    
Adjusted EBITDA   $  653     $  418     $  235    
                     
                     
EBITDA margin      (3 ) %    (7 ) %    1   %
Adjusted EBITDA margin      36   %    43   %    29   %


                                             
    YTD   QTD   YTD   QTD   YTD   QTD   YTD  
    12/31/19   12/31/19   09/30/19   09/30/19   06/30/19   06/30/19   03/31/19  
                                             
Contract drilling revenues   $  3,088     $  792     $  2,296     $  784     $  1,512     $  758     $  754    
Contract intangible amortization      187        47        140        48        92        47        45    
Adjusted Contract Drilling Revenues   $  3,275     $  839     $  2,436     $  832     $  1,604     $  805     $  799    
                                             
Net loss   $  (1,257 )   $  (55 )   $  (1,202 )   $  (825 )   $  (377 )   $  (206 )   $  (171 )  
Interest expense, net of interest income      617        150        467        155        312        156        156    
Income tax expense (benefit)      59        (24 )      83        54        29        37        (8 )  
Depreciation and amortization      855        207        648        212        436        219        217    
Contract intangible amortization      187        47        140        48        92        47        45    
EBITDA      461        325        136        (356 )      492        253        239    
                                             
Acquisition and restructuring costs      6        5        1        —        1        1        —    
Loss on impairment of assets      609        25        584        583        1        1        —    
(Gain) loss on disposal of assets, net      5        (2 )      7        6        1        2        (1 )  
Gain on bargain purchase      (11 )      —        (11 )      —        (11 )      (9 )      (2 )  
Loss on retirement of debt      41        2        39        12        27        9        18    
Gain on termination of construction contracts      (132 )      (132 )      —        —        —        —        —    
Adjusted EBITDA   $  979     $  223     $  756     $  245     $  511     $  257     $  254    
                                             
                                             
EBITDA margin      14   %    39   %    6   %    (43 ) %    31   %    31   %    30   %
Adjusted EBITDA margin      30   %    27   %    31   %    29   %    32   %    32   %    32   %
                                             


                                 
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  
    2020   2020   2019   2020   2019  
Loss before income taxes   $  (465 )   $  (395 )   $  (169 )   $  (860 )   $  (348 )  
Acquisition and restructuring costs      1        —        1        1        1    
Gain on bargain purchase      —        —        (9 )      —        (11 )  
Loss on impairment of assets      429        168        1        597        1    
Loss on impairment of investment in unconsolidated affiliate      59        —        —        59        —    
Loss on disposal of assets, net      —        —        2        —        1    
(Gain) loss on retirement of debt      (4 )      57        9        53        27    
Adjusted income (loss) before income taxes   $  20     $  (170 )   $  (165 )   $  (150 )   $  (329 )  
                                 
Revenues recognized for the settlement of disputes      (157 )                  (157 )        
Adjusted income (loss) before income taxes for determining effective tax rate      (137 )                  (307 )        
                                 
                                 
Income tax expense (benefit)   $  32     $  (4 )   $  37     $  28     $  29    
Acquisition and restructuring costs      —        —        —        —        —    
Gain on bargain purchase      —        —        —        —        —    
Loss on impairment of assets      (1 )      1        —        —        —    
Loss on impairment of investment in unconsolidated affiliate      —        —        —        —        —    
Loss on disposal of assets, net      —        —        —        —        —    
(Gain) loss on retirement of debt      —        —        —        —        —    
Changes in estimates (1)      (8 )      19        5        11        30    
Revenues recognized for the settlement of disputes      (2 )      —        —        (2 )      —    
Adjusted income tax expense (2)   $  21     $  16     $  42     $  37     $  59    
                                 
Effective Tax Rate (3)      (6.8 ) %    1.1   %    (21.9 )    (3.2 ) %    (8.3 ) %
                                 
Effective Tax Rate, excluding discrete items (4)      (15.0 ) %    (9.5 ) %    (25.4 ) %    (12.0 ) %    (18.0 ) %
                                 
                                 
(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, 2020 included $32 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.