Transocean Sedco Forex Reports First Quarter 2002 Results
During the first quarter of 2002, the company performed its initial test of impairment for goodwill on its two reporting units, "Gulf of Mexico Shallow and Inland Water" and "International and U.S. Floater Contract Drilling Services." The test, which was applied utilizing the fair value of the reporting units at January 1, 2002, resulted in a non-cash charge of $1,363.7 million, or $4.22 per diluted share, to reflect the impairment of goodwill associated with the Gulf of Mexico Shallow and Inland Water reporting unit. There was no goodwill impairment charge in the International and U.S. Floater Contract Drilling Services reporting unit. In accordance with SFAS 142, the company has discontinued the amortization of goodwill as of January 1, 2002. The company's goodwill balance, after giving effect to the goodwill write down, is $5.1 billion.
During the three months ended March 31, 2001, the company reported net income of $30.5 million, or $0.11 per diluted share, on revenues of $550.1 million. The results included a $15.9 million, or $0.06 per diluted share, net after-tax gain pertaining to the sale of a semisubmersible rig owned by a joint venture in which the company has a 25% equity interest. Goodwill amortization for the three months ended March 31, 2001 totaled $30.2 million, or $0.11 per diluted share. Adjusting for the net after-tax gain and excluding goodwill amortization expense, net income for the three months ended March 31, 2001 was $44.8 million, or $0.16 per diluted share.
Transocean Sedco Forex completed a merger transaction with R&B Falcon Corporation on January 31, 2001. Therefore, results for the three months ended March 31, 2001 reflect only two months of operating results of R&B Falcon Corporation. Pro forma utilization measures noted below have been calculated based on the combined fleet of Transocean Sedco Forex and R&B Falcon for the three months ended March 31, 2001.
Operating revenues from the company's International and U.S. Floater Contract Drilling Services business segment totaled $623.2 million during the three months ended March 31, 2002, an 8% decline from operating segment revenues of $678.4 million during the three months ended December 31, 2001. Revenues from this segment accounted for 93% of total operating revenues during the first quarter of 2002. Operating income, defined as operating revenues less operating and maintenance expenses, declined 4% to $294.5 million during the three months ended March 31, 2002, compared to $305.4 million during the three months ended December 31, 2001. Segment fleet utilization declined to 82% during the three months ended March 31, 2002, from 86% during the three months ended December 31, 2001.
Operating revenues from the company's Gulf of Mexico Shallow and Inland Water business segment declined 35% during the three months ended March 31, 2002, to $44.7 million compared to segment operating revenues of $69.2 million during the three months ended December 31, 2001. The further weakening operating environment that has persisted since mid-2001 resulted in a $7.6 million segment operating loss during the three months ended March 31, 2002, compared to an operating profit of $2.4 million during the three months ended December 31, 2001. Segment utilization declined to 31% during the three months ended March 31, 2002, from 38% during the fourth quarter of 2001.
As of March 31, 2002, net debt (defined as long-term debt plus debt due within one year, less cash and cash equivalents) was $4,009 million, down $161 million from net debt of $4,170 million as of December 31, 2001 and down $599 million from net debt of $4,608 million as of March 31, 2001.
J. Michael Talbert, Chief Executive Officer of Transocean Sedco Forex Inc., stated, "Declining drilling activity in the North America floater market sector, the Norwegian sector of the North Sea and the Gulf of Mexico Shallow and Inland Water segment, combined with the mobilization of two high-specification rigs, contributed substantially to an 11% decline in operating revenues during the first quarter of 2002, compared to the final three months of 2001. The uncertain duration of lower activity resulted in decisions to immediately cold-stack several rigs in each of our two business segments following the conclusion of contract commitments. These decisions, coupled with the deferral of some discretionary rig maintenance projects to later periods in 2002, helped to reduce operating and maintenance expenses by $58.8 million during the quarter, or 13% compared to levels experienced during the three months ended December 31, 2001."
In commenting on the company's adoption of SFAS 142, Talbert explained, "The non-cash goodwill impairment charge reflects the highly cyclical nature of the shallow and inland water business in the U.S. Gulf of Mexico. An initial $1.8 billion of unamortized goodwill was allocated to the business segment at January 31, 2001, based on fair value assumptions when the business was progressing toward a cyclical peak. Our initial test for goodwill impairment was required to be performed 11 months later, when the segment had deteriorated to a cyclical low."
In closing, Talbert stated, "The outlook for 2002 drilling activity remains uncertain. Reduced rig demand in Norway has materialized as expected, while several market sectors for conventional semisubmersible rigs are noticeably weaker today than 90 days ago, in particular the U.S. Gulf of Mexico and West Africa. Globally, the international deepwater drilling market is essentially in balance, with opportunities emerging offshore India. The U.S. Gulf of Mexico deepwater market sector is currently oversupplied, but is expected to see higher rig utilization during the second half of 2002 or early 2003, driven by a greater mix of development drilling projects and by rig mobilizations to other, currently more active deepwater regions. Our jackup rig fleet in the U.S. Gulf of Mexico is experiencing a modest improvement in customer interest, resulting in one previously stacked 200 foot, mat-cantilever unit returning to work on an estimated 120-day drilling program. Two to three other units in our jackup rig fleet that are currently stacked could return to work in the next 30 to 60 days."
Statements regarding future deferral of rig maintenance projects, outlook for drilling activity, rig demand, drilling opportunities, future utilization, future activity for stacked rigs, drilling market conditions, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to the future price of oil and gas, demand for rigs, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, competition, risks of drilling, contract terminations or suspensions and other factors detailed in the company's most recent Form 10-K for the year ended December 31, 2001 and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
Conference Call InformationThe company will conduct a teleconference call at 10:00 a.m. EDT on April 30, 2002. Individuals who wish to participate in the teleconference call may dial 719/457-2641 and refer to confirmation code 324325. It is recommended that participants dial in five to 10 minutes prior to the scheduled start time of the call.
In addition, the conference call will be simulcast through a listen-only broadcast over the Internet and can be accessed by logging onto the company's Worldwide Web address at www.deepwater.com and selecting "Investor Relations." It may also be accessed via the Worldwide Web at www.CompanyBoardroom.com by typing in the company's NYSE trading symbol, "RIG."
A telephonic replay of the conference call should be available after 1:00 p.m. EDT on April 30 and can be accessed by dialing 719/457-0820 and referring to the passcode 324325. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Both replay options will be available for approximately 30 days.
Monthly Fleet Update InformationDrilling rig status and contract information on Transocean Sedco Forex's offshore drilling fleet has been condensed into two reports titled "Monthly Fleet Update" and "Monthly Fleet Update - Jackups and Barges," which are available through the company's Website at www.deepwater.com. The reports are located in the "Investor Relations/Financial Reports" section of the Website. By subscribing to the Transocean Sedco Forex Financial Report Alert, you will be immediately notified when new postings are made to this page by an automated e-mail, which will provide a link directly to the page that has been updated. We invite you to sign up for this service.
Transocean Sedco Forex Inc. is the world's largest offshore drilling contractor with more than 150 full or partially owned and managed mobile offshore drilling units, inland drilling barges and other assets utilized in the support of offshore drilling activities worldwide. The company's mobile offshore drilling fleet is considered one of the most modern and versatile in the world with 31 high-specification semisubmersibles and drillships, 28 other semisubmersibles and one drillship, and 54 jackup drilling rigs. Transocean Sedco Forex Inc. specializes in technically demanding segments of the offshore drilling business, including industry-leading positions in deepwater and harsh environment drilling services. With a current equity market capitalization in excess of $10.5 billion, the company's ordinary shares are traded on the New York Stock Exchange under the symbol "RIG."
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended
March 31,
-----------------------
2002 2001
--------- ---------
Operating Revenues $667.9 $550.1
Costs and Expenses
Operating and maintenance 381.0 351.0
Depreciation 125.6 99.3
Goodwill amortization -- 30.2
General and administrative 19.8 14.7
526.4 495.2
Impairment Loss on Long-Lived Assets (1.1) --
Gain from Sale of Assets, net 1.9 19.6
Operating Income 142.3 74.5
Other Income (Expense), net
Equity in earnings of joint ventures 1.9 1.7
Interest income 4.2 3.6
Interest expense, net of amounts
capitalized (55.9) (37.2)
Other, net (0.7) (0.6)
(50.5) (32.5)
Income Before Income Taxes, Minority
Interest and Cumulative Effect of
Change in Accounting Principle 91.8 42.0
Income Tax Expense 13.8 10.2
Minority Interest 0.7 1.3
Net Income Before Cumulative Effect
of Change in Accounting Principle 77.3 30.5
Cumulative Effect of Change in
Accounting Principle (1,363.7) --
Net Income (Loss) $(1,286.4) $30.5
Basic Earnings (Loss) Per Share
Income Before Cumulative Effect of
Change in Accounting Principle $0.24 $0.11
Loss on Cumulative Effect of Change
in Accounting Principle (4.27) --
Net Income (Loss) $(4.03) $0.11
Diluted Earnings (Loss) Per Share
Income Before Cumulative Effect of
Change in Accounting Principle $0.24 $0.11
Loss on Cumulative Effect of Change
in Accounting Principle (4.22) --
Net Income (Loss) $(3.98) $0.11
Weighted Average Shares Outstanding
Basic 319.1 280.6
Diluted 323.1 285.5
On January 31, 2001, the company completed a merger transaction
with R&B Falcon Corporation. As a result of the merger, R&B Falcon
Corporation became an indirect wholly owned subsidiary of the company.
The company accounted for the merger using the purchase method of
accounting with the company treated as the accounting acquiror. The
above Consolidated Statement of Operations for the three months ended
March 31, 2001 includes two months of operating results of R&B Falcon
Corporation.
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
March 31, Dec. 31,
-----------------------
2002 2001
--------- ---------
ASSETS (Unaudited)
Cash and Cash Equivalents $588.1 $853.4
Accounts Receivable
Trade 617.4 602.9
Other 67.1 72.8
Materials and Supplies 167.3 158.8
Deferred Income Taxes 22.2 21.0
Other Current Assets 48.0 27.9
Total Current Assets 1,510.1 1,736.8
Property and Equipment 10,058.0 10,081.4
Less Accumulated Depreciation 1,817.2 1,713.3
Property and Equipment, net 8,240.8 8,368.1
Goodwill, net 5,103.0 6,466.7
Investments in and Advances to
Joint Ventures 116.0 107.1
Other Assets 334.5 341.1
Total Assets $15,304.4 $17,019.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $155.0 $188.4
Accrued Income Taxes 203.9 188.2
Debt Due Within One Year 151.8 484.4
Other Current Liabilities 297.3 283.4
Total Current Liabilities 808.0 1,144.4
Long-Term Debt 4,444.9 4,539.4
Deferred Income Taxes 295.0 317.1
Other Long-Term Liabilities 129.8 108.6
Total Long-Term Liabilities 4,869.7 4,965.1
Commitments and Contingencies
SHAREHOLDERS' EQUITY
Preference Shares, $0.10 par value;
50,000,000 shares authorized, none
issued and outstanding -- --
Ordinary Shares, $0.01 par value;
800,000,000 shares authorized,
319,140,615 and 318,816,035 shares
issued and outstanding at March 31,
2002 and December 31, 2001,
respectively 3.2 3.2
Additional Paid-in Capital 10,621.0 10,611.7
Accumulated Other Comprehensive Income 0.8 (2.3)
Retained Earnings (Deficit) (998.3) 297.7
Total Shareholders' Equity 9,626.7 10,910.3
Total Liabilities and
Shareholders' Equity $15,304.4 $17,019.8
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
March 31,
-----------------------
2002 2001
--------- ---------
Cash Flows from Operating Activities
Net income (Loss) $(1,286.4) $30.5
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation 125.6 99.3
Goodwill amortization -- 30.2
Cumulative effect of change in
accounting principle - Goodwill
impairment 1,363.7 --
Deferred income taxes (23.3) (7.2)
Equity in earnings of joint ventures (1.9) (1.7)
Net gain from disposal of assets -- (19.5)
Loss on sale of securities -- 0.8
Impairment on long-lived assets 1.1 --
Amortization of debt-related
discounts/premiums, fair value
Adjustments and issue costs, net 1.3 (4.9)
Deferred income, net (5.4) (19.6)
Deferred expenses, net 7.4 (11.3)
Other, net 5.2 11.2
Changes in operating assets and
liabilities, net of effects from
the R&B Falcon merger
Accounts receivable (8.9) (26.9)
Accounts payable and other current
liabilities (4.6) (32.9)
Income taxes receivable/payable,
net 15.8 12.3
Other current assets (27.6) (14.6)
Net Cash Provided by Operating Activities 162.0 45.7
Cash Flows from Investing Activities
Capital expenditures (47.7) (255.8)
Other proceeds from disposal of
assets, net 43.4 4.7
Merger costs paid -- (24.6)
Cash acquired in merger, net of
cash paid -- 264.7
Joint ventures and other
investments, net (3.6) 1.6
Net Cash Used in Investing Activities (7.9) (9.4)
Cash Flows from Financing Activities
Net borrowings on revolving credit
agreements -- 180.9
Net borrowings (repayments) under
commercial paper program (326.4) 15.0
Repayments on debt obligations (85.0) (12.9)
Net proceeds from issuance of
ordinary shares under
stock-based compensation plans 9.1 11.5
Proceeds from issuance of ordinary
shares upon exercise of warrants -- 8.3
Dividends paid (9.6) (9.5)
Financing costs (8.2) --
Other, net 0.7 1.5
Net Cash Provided by (Used in)
Financing Activities (419.4) 194.8
Net Increase (Decrease) in Cash and
Cash Equivalents (265.3) 231.1
Cash and Cash Equivalents at
Beginning of Period 853.4 34.5
Cash and Cash Equivalents at
End of Period $588.1 $265.6
Transocean Sedco Forex Inc.
Fleet Operating Statistics
Operating Revenues ($ Millions)
-----------------------------------
Three Months Ended
International and U.S. -----------------------------------
Floater Contract Drilling March 31, Dec. 31, March 31,
Services Segment: 2002 2001(2) 2001(1)(2)
--------- --------- ---------
High-Specification Floaters $309.9 $354.7 $267.8
Other Floaters $164.2 $176.9 $121.1
Jackups - Non-U.S. $124.1 $112.5 $65.1
Other $25.0 $34.3 $94.7
Segment Total $623.2 $678.4 $548.7
Gulf of Mexico Shallow and
Inland Water Segment:
Jackups and Submersibles $13.4 $24.4 $80.2
Inland Barges $21.7 $32.0 $38.7
Other $9.6 $12.8 $8.4
Segment Total $44.7 $69.2 $127.3
Total Company $667.9 $747.6 $676.0
Average Dayrates (3)
-----------------------------------
Three Months Ended
International and U.S. -----------------------------------
Floater Contract Drilling March 31, Dec. 31, March 31,
Services Segment: 2002 2001 2001(1)
--------- --------- ---------
High-Specification Floaters $145,500 $145,000 $134,000
Other Floaters $77,300 $71,100 $59,000
Jackups - Non-U.S. $58,800 $52,800 $38,400
Other $43,900 $41,300 $38,700
Segment Total $91,000 $88,200 $76,300
Gulf of Mexico Shallow and
Inland Water Segment:
Jackups and Submersibles $22,200 $30,600 $35,400
Inland Barges $19,200 $22,800 $19,100
Segment Total $20,300 $25,600 $27,700
Total Mobile Offshore
Drilling Fleet $76,600 $74,000 $56,300
Utilization (3)
-----------------------------------
Three Months Ended
International and U.S. -----------------------------------
Floater Contract Drilling March 31, Dec. 31, March 31,
Services Segment: 2002 2001 2001(1)
--------- --------- ---------
High-Specification Floaters 82% 90% 83%
Other Floaters 82% 89% 70%
Jackups - Non-U.S. 90% 89% 79%
Other 57% 54% 51%
Segment Total 82% 86% 74%
Gulf of Mexico Shallow and
Inland Water Segment:
Jackups and Submersibles 22% 27% 74%
Inland Barges 41% 49% 67%
Segment Total 31% 38% 71%
Total Mobile Offshore
Drilling Fleet 61% 67% 73%
(1) Transocean Sedco Forex completed a merger transaction with R&B
Falcon on January 31, 2001. Therefore, operating revenues, average
dayrates and utilization for the three months ended March 31, 2001
are stated as pro forma results based on the combined fleet of
Transocean Sedco Forex and R&B Falcon.
(2) Certain reclassifications have been made to prior periods to
conform to current quarter presentation.
(3) Average dayrates and utilization for core assets only.
CONTACT: Transocean Sedco Forex Inc., Houston
Analyst Contact:
Jeffrey L. Chastain, 713/232-7551
or
Media Contact:
Guy A. Cantwell, 713/232-7647