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Transocean Inc. Reports Third Quarter 2002 Results

October 29, 2002
HOUSTON--(BUSINESS WIRE)--Oct. 29, 2002--Transocean Inc.(NYSE:RIG - News) today reported net income for the three months endedSeptember 30, 2002 of $255.2 million, or $0.78 per diluted share, onrevenues of $695.2 million. During the quarter, the company recognizeda tax benefit totaling $176.2 million, or $0.53 per diluted share,attributable to the restructuring of certain non-U.S. operations,which utilized a previously unrecognized loss related to certainnon-U.S. subsidiaries. Quarterly results also included a $26.6 millionafter-tax loss, or $0.08 per diluted share, resulting from thenon-cash impairment of certain long lived assets previously classifiedas held for sale. Excluding the impact of the tax benefit and thenon-cash loss due to the impairment of assets, net income for thethree months ended September 30, 2002 was $105.6 million, or $0.33 perdiluted share. The company's diluted weighted average share countduring the quarter increased to 334.3 million shares from 323.9million shares during the preceding quarter in 2002 due primarily tothe dilutive effect of certain convertible debentures. For thecorresponding three months in 2001, net income totaled $97.6 million,or $0.30 per diluted share, on revenues of $770.2 million. Results forthe prior year quarter included a net after-tax gain of $7.5 million,or $0.02 per diluted share, resulting primarily from the sale of twoNigerian-based land rigs and the disposal of an inland drilling bargeand goodwill amortization of $41.7 million, or $0.13 per dilutedshare. Excluding the net after-tax gain and goodwill amortization, netincome for the three months ended September 30, 2001 was $131.8million, or $0.41 per diluted share.

For the nine months ended September 30, 2002, the company reporteda net loss of $951.2 million, or $2.88 per diluted share, on revenuesof $2,009.3 million. Results for the first nine months of 2002included the previously discussed tax benefit and non-cash loss on theimpairment of long lived assets, in addition to a non-cash charge of$1,363.7 million, or $4.15 per diluted share, pertaining to theadoption in January 2002 of Statement of Financial AccountingStandards 142 (FAS 142), Goodwill and Other Intangible Assets.Excluding the impact of the tax benefit, loss from the non-cashimpairment of assets and the non-cash charge related to FAS 142, netincome for the nine months ended September 30, 2002 was $262.9million, or $0.81 per diluted share. The company's effective tax ratewould have been 13.9% without the effect of the tax benefit. For thecorresponding nine months in 2001, net income was $196.6 million, or$0.63 per diluted share, on revenues of $2,072.5 million. The resultsincluded a net after-tax gain from the sale of assets totaling $23.5million, or $0.07 per diluted share, offset by a $17.3 million, or$0.06 per diluted share, net after-tax extraordinary loss relating tothe early retirement of certain debt and goodwill amortization of$113.4 million, $0.36 per diluted share. Adjusting for the netafter-tax gain, extraordinary loss and goodwill amortization, netincome for the nine months ended September 30, 2001 was $303.8million, or $0.98 per diluted share.

Transocean Inc. completed a merger transaction with R&B FalconCorporation on January 31, 2001. Consequently, operating results forthe nine months ended September 30, 2001 reflect only eight months ofoperating results of R&B Falcon Corporation.

During the three months ended September 30, 2002, revenues fromthe company's International and U.S. Floater Contract DrillingServices segment improved 5% to $641.2 million compared to revenues of$609.1 million reported during the three months ended June 30, 2002.Operating income, before depreciation and general and administrativeexpenses, rose 9% to $315.5 million from $289.0 million during thepreceding three month period.

Higher average utilization and dayrates during the three monthsended September 30, 2002 produced a 46% improvement in revenues withinthe Gulf of Mexico Shallow and Inland Water segment to $54.0 million,compared to $37.1 million during the preceding quarter in 2002.Average utilization of 40% during the three months ended September 30,2002, up from 27% during the preceding quarter, contributed to thesegment's reduced operating loss of $1.4 million, compared to the $8.4million operating loss for the quarter ended June 30, 2002.

The company's net debt declined further during the quarter, to$3,509 million at September 30, 2002, representing a reduction of $870million and $647 million from net debt levels at September 30, 2001and December 31, 2001, respectively.

The company also reported that it will conduct its annual test ofgoodwill impairment as of October 1, 2002, as prescribed by FAS 142.As a result of the decline in the company's stock price since January1, 2002, when the initial test under FAS 142 was performed, the teston October 1, 2002 is expected to result in a non-cash impairment togoodwill representing a significant majority of the $5.1 billion atSeptember 30, 2002. The impairment is expected to affect both of thecompany's reporting units.

Statements regarding the results of the company's annual test ofgoodwill impairment, as well as any other statements that are nothistorical facts in this release, are forward-looking statements thatinvolve certain risks, uncertainties and assumptions. These includebut are not limited to the fair market value of the company's assets,the future price of oil and gas, demand for rigs, operating hazardsand delays, risks associated with international operations, actions bycustomers and other third parties, competition, risks of drilling,contract terminations or suspensions and other factors detailed in thecompany's most recent Form 10-K for the year ended December 31, 2001and other filings with the Securities and Exchange Commission. Shouldone or more of these risks or uncertainties materialize, or shouldunderlying assumptions prove incorrect, actual results may varymaterially from those indicated.

Conference Call Information

The company will conduct a teleconference call at 10:00 a.m. ET onOctober 29, 2002. Individuals who wish to participate in theteleconference call may dial 719-457-2641 and refer to confirmationcode 146882. It is recommended that participants dial in five to 10minutes prior to the scheduled start time of the call.

In addition, the conference call will be simulcast through alisten-only broadcast over the Internet and can be accessed by loggingonto the company's Worldwide Web address at www.deepwater.com andselecting \"Investor Relations.\" It may also be accessed via theWorldwide Web at www.CompanyBoardroom.com by typing in the company'sNYSE trading symbol, \"RIG.\"

A telephonic replay of the conference call should be availableafter 1:00 p.m. ET on October 29 and can be accessed by dialing719/457-0820 and referring to the passcode 146882. Also, a replay willbe available through the Internet and can be accessed by visitingeither of the above-referenced Worldwide Web addresses. Both replayoptions will be available for approximately 30 days.

Monthly Fleet Update Information

Drilling rig status and contract information on Transocean Inc.'soffshore drilling fleet has been condensed into two reports titled\"Monthly Fleet Update\" and \"Monthly Fleet Update - Jackups andBarges,\" which are available through the company's Website atwww.deepwater.com. The reports are located in the \"InvestorRelations/Financial Reports\" section of the Website. By subscribing tothe Transocean Financial Report Alert, you will be immediatelynotified when new postings are made to this page by an automatede-mail, which will provide a link directly to the page that has beenupdated. Shareholders and other interested parties are invited to signup for this service.

Transocean Inc. is the world's largest offshore drillingcontractor with more than 150 full or partially owned and managedmobile offshore drilling units, inland drilling barges and otherassets utilized in the support of offshore drilling activitiesworldwide. The company's mobile offshore drilling fleet is consideredone of the most modern and versatile in the world with 31high-specification semisubmersibles and drillships, 27 othersemisubmersibles and two drillships, and 54 jackup drilling rigs.Transocean Inc. specializes in technically demanding segments of theoffshore drilling business, including industry-leading positions indeepwater and harsh environment drilling services. With a currentequity market capitalization in excess of $6 billion, the company'sordinary shares are traded on the New York Stock Exchange under thesymbol \"RIG.\"

                   TRANSOCEAN INC. AND SUBSIDIARIES            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                 (In millions, except per share data)                              (Unaudited)                                 Three Months Ended  Nine Months Ended                                    September 30,      September 30,                               ------------------ --------------------                                    2002    2001       2002      2001                                  -------  ------  ---------  --------  Operating Revenues             $ 695.2  $770.2  $ 2,009.3  $2,072.5  Costs and Expenses    Operating and maintenance      381.1   418.2    1,127.7   1,163.5    Depreciation                   124.2   125.4      374.1     348.3    Goodwill amortization              -    41.7          -     113.4    General and administrative      15.8    14.5       51.6      43.9                                   521.1   599.8    1,553.4   1,669.1  Impairment Loss on Long-Lived   Assets                          (40.9)      -      (42.0)        -  Gain from Sale of Assets, net      2.9     9.4        3.5      29.0  Operating Income                 136.1   179.8      417.4     432.4  Other Income (Expense), net    Equity in earnings of joint     ventures                        0.4     6.3        4.8      12.0    Interest income                  6.1     5.5       16.0      13.7    Interest expense, net of     amounts capitalized           (52.3)  (60.8)    (160.7)   (164.8)    Other, net                       1.3    (0.5)       0.2      (2.0)                                   (44.5)  (49.5)    (139.7)   (141.1)  Income Before Income Taxes,   Minority Interest,   Extraordinary Item and   Cumulative Effect   of a Change in Accounting    Principle                       91.6   130.3      277.7     291.3  Income Tax Expense (Benefit)    (164.8)   32.6     (137.1)     74.9  Minority Interest                  1.2     0.1        2.3       2.5  Net Income Before   Extraordinary Item and   Cumulative   Effect of a Change in    Accounting Principle           255.2    97.6      412.5     213.9  Loss on Extraordinary Item,   net of tax                          -       -          -     (17.3)  Cumulative Effect of  a   Change in Accounting   Principle                           -       -   (1,363.7)        -  Net Income (Loss)              $ 255.2  $ 97.6  $  (951.2) $  196.6  Basic Earnings (Loss) Per Share     Income Before      Extraordinary Item and      Cumulative Effect of      a Change in Accounting       Principle                 $  0.80  $ 0.31     $ 1.29  $   0.70     Loss on Extraordinary      Item, net of tax                 -       -          -     (0.06)     Loss on Cumulative Effect      of a Change in Accounting      Principle                        -       -      (4.27)        -     Net Income (Loss)           $  0.80  $ 0.31     $(2.98) $   0.64  Diluted Earnings (Loss) Per Share     Income Before      Extraordinary Item and      Cumulative Effect of      a Change in Accounting       Principle                 $  0.78  $ 0.30     $ 1.27  $   0.69     Loss on Extraordinary      Item, net of tax                 -       -          -     (0.06)     Loss on Cumulative Effect      of a Change in Accounting      Principle                        -       -      (4.15)        -     Net Income (Loss)           $  0.78  $ 0.30     $(2.88) $   0.63  Weighted Average Shares   Outstanding    Basic                          319.2   318.7      319.1     305.2    Diluted                        334.3   322.7      328.6     310.7    On January 31, 2001, the company completed a merger transactionwith R&B Falcon Corporation. As a result of the merger, R&B FalconCorporation became an indirect wholly owned subsidiary of the company.The company accounted for the merger using the purchase method ofaccounting with the company treated as the accounting acquiror. Theabove Consolidated Statement of Operations for the nine months endedSeptember 30, 2001 includes eight months of operating results of R&BFalcon Corporation.                   TRANSOCEAN INC. AND SUBSIDIARIES                 CONDENSED CONSOLIDATED BALANCE SHEETS                   (In millions, except share data)                                             September 30, December 31,                                                    2002         2001                                                ---------    ---------                                              (Unaudited)                                  ASSETSCash and Cash Equivalents                      $ 1,021.8    $   853.4Accounts Receivable   Trade                                           472.3        602.9   Other                                            72.0         72.8Materials and Supplies                             164.0        158.8Deferred Income Taxes                               21.3         21.0Other Current Assets                                32.5         27.9   Total Current Assets                          1,783.9      1,736.8Property and Equipment                          10,150.2     10,081.4Less Accumulated Depreciation                    2,053.0      1,713.3   Property and Equipment, net                   8,097.2      8,368.1Goodwill, net                                    5,099.1      6,466.7Investments in and Advances to Joint Ventures                                          107.0        107.1Other Assets                                       422.9        341.1     Total Assets                              $15,510.1    $17,019.8    LIABILITIES AND SHAREHOLDERS' EQUITYAccounts Payable                               $   128.1    $   188.4Accrued Income Taxes                                61.2        118.3Debt Due Within One Year                           941.6        484.4Other Current Liabilities                          280.9        283.4     Total Current Liabilities                   1,411.8      1,074.5Long-Term Debt                                   3,780.8      4,539.4Deferred Income Taxes                              128.1        317.1Other Long-Term Liabilities                        236.9        178.5     Total Long-Term Liabilities                 4,145.8      5,035.0Commitments and ContingenciesPreference 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,     319,219,486 and 318,816,035 shares      issued and outstanding at     September 30, 2002 and December 31,      2001, respectively                             3.2          3.2Additional Paid-in Capital                      10,622.7     10,611.7Accumulated Other Comprehensive Income              (0.7)        (2.3)Retained Earnings (Deficit)                       (672.7)       297.7     Total Shareholders' Equity                  9,952.5     10,910.3     Total Liabilities and Shareholders'      Equity                                   $15,510.1    $17,019.8Consolidated Debt                              $ 4,722.4    $ 5,023.8Less: Cash and Cash Equivalents                  1,021.8        853.4Less: Swap Receivable                              191.8         15.1Net Debt                                       $ 3,508.8    $ 4,155.3Net Debt/Total Capital (excluding Goodwill, net)                                               42.0%        48.3%                   TRANSOCEAN INC. AND SUBSIDIARIES            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                             (In millions)                              (Unaudited)                                                       Nine Months                                                   Ended September 30,                                                  --------------------                                                      2002       2001                                                   --------  ---------   Cash Flows from Operating Activities      Net income (loss)                           $ (951.2) $   196.6      Adjustments to reconcile net income (loss)       to net cash provided by operating activities         Depreciation                                374.1      348.3         Goodwill amortization                           -      113.4         Cumulative effect of a change in          accounting principle - goodwill           impairment                              1,363.7          -         Deferred income taxes                      (189.8)     (62.0)         Equity in earnings of joint ventures         (4.8)     (12.0)         Net (gain) loss from disposal of assets       1.2      (25.9)         Impairment on long-lived assets              42.0          -         Loss on sale of securities                      -        2.0         Amortization of debt-related          discounts/premiums, fair value            adjustments and issue costs, net           4.6       (4.2)         Deferred income, net                         (9.3)     (42.8)         Deferred expenses, net                       (7.7)     (38.1)         Extraordinary loss on debt          extinguishment, net of tax                     -       17.3         Other, net                                   11.9      (10.3)         Changes in operating assets and          liabilities, net of effects from the            R&B Falcon merger             Accounts receivable                     132.0     (103.5)             Accounts payable and other current              liabilities                            (41.9)     (78.7)             Income taxes receivable/payable, net    (15.9)      75.4             Other current assets                     (8.7)      (9.2)   Net Cash Provided by Operating Activities         700.2      366.3   Cash Flows from Investing Activities     Capital expenditures                           (114.6)    (443.1)     Proceeds from sale of securities                    -       17.2     Proceeds from disposal of assets, net            73.6      108.4     Merger costs paid                                   -      (24.4)     Cash acquired in merger, net of cash paid           -      264.7     Joint ventures and other investments, net         4.6       13.0   Net Cash Used in Investing Activities             (36.4)     (64.2)   Cash Flows from Financing Activities   Net borrowings (repayments) on revolving    credit agreements                                    -     (180.1)   Net borrowings (repayments) under commercial    paper program                                   (326.4)         -   Net proceeds from issuance of other debt              -    1,693.5   Repayments on other debt obligations             (154.3)  (1,500.1)   Net proceeds from issuance of ordinary shares    under stock-based compensation plans              10.2       29.5   Proceeds from issuance of ordinary shares upon    exercise of warrants                                 -       10.6   Dividends paid                                    (19.1)     (28.6)   Financing costs                                    (8.1)     (15.7)   Other, net                                          2.3        5.3   Net Cash Provided by (Used in) Financing    Activities                                      (495.4)      14.4   Net Increase in Cash and Cash Equivalents         168.4      316.5   Cash and Cash Equivalents at Beginning of    Period                                           853.4       34.5   Cash and Cash Equivalents at End of Period     $1,021.8  $   351.0                            Transocean Inc.                      Fleet Operating Statistics                              Operating Revenues ($ Millions)                     -------------------------------------------------                                                    Nine Months Ended                          Three Months Ended          September 30,                     ----------------------------- -------------------International and U.S. Floater        Sept.      June       Sept. Contract Drilling     30,        30,        30,                2001Services Segment:      2002      2002     2001 (2)    2002     (1)(2)                      ------  --------  ---------- ---------  --------      High-       Specification       Floaters      $326.4  $  335.1  $    341.5  $  971.4  $  935.3      Other Floaters $157.8  $  143.2  $    160.6  $  465.2  $  444.2      Jackups - Non-       U.S.          $117.0  $  107.3  $     93.3  $  348.4  $  240.2      Other          $ 40.0  $   23.5  $     46.1  $   88.5  $  168.6Segment Total        $641.2  $  609.1  $    641.5  $1,873.5  $1,788.3Gulf of Mexico Shallow and Inland Water Segment:      Jackups and       Submersibles  $ 21.7  $   17.3  $     59.6  $   52.3  $  228.8      Inland Barges  $ 27.5  $   13.5  $     53.7  $   62.7  $  139.7      Other          $  4.8  $    6.3  $     15.4  $   20.8  $   41.1Segment Total        $ 54.0  $   37.1  $    128.7  $  135.8  $  409.6Total Company        $695.2  $  646.2  $    770.2  $2,009.3  $2,197.9                                      Average Dayrates (3)                        ----------------------------------------------                                                   Nine Months Ended                             Three Months Ended      September 30,                        --------------------------- ------------------International and U.S.  Floater Contract   Drilling             Sept. 30, June 30, Sept. 30,Services Segment:           2002     2002      2001     2002  2001 (1)                         -------- --------  ------- -------- --------      High-       Specification       Floaters         $144,600 $150,200  $144,800 $146,800 $143,800      Other Floaters    $ 81,300 $ 76,800  $ 66,600 $ 78,500 $ 63,000      Jackups - Non-       U.S.             $ 60,400 $ 57,400  $ 49,200 $ 58,900 $ 44,000      Other             $ 55,100 $ 43,700  $ 42,500 $ 47,300 $ 39,300Segment Total           $ 95,500 $ 94,500  $ 86,700 $ 93,600 $ 82,400Gulf of Mexico Shallow and Inland Water Segment:      Jackups and       Submersibles     $ 23,000 $ 21,000  $ 37,700 $ 22,100 $ 37,700      Inland Barges     $ 20,700 $ 20,200  $ 24,400 $ 20,100 $ 22,300Segment Total           $ 21,600 $ 20,700  $ 30,000 $ 20,900 $ 29,800Total Mobile Offshore Drilling Fleet         $ 76,400 $ 80,500  $ 66,900 $ 77,700 $ 62,500                                           Utilization (3)                              ----------------------------------------                                 Three Months Ended      Nine Months                                                            Ended                                                        September 30,                              ------------------------ --------------International and U.S.        Sept.   June       Sept. Floater Contract Drilling     30,      30,        30, Services Segment:            2002    2002        2001  2002  2001 (1)                              ------------------------ --------------      High-Specification       Floaters                 85%     85%         87%   84%      86%      Other Floaters            76%     73%         82%   77%      78%      Jackups - Non-U.S.        84%     82%         84%   86%      83%      Other                     51%     60%         48%   56%      51%Segment Total                   79%     78%         81%   80%      79%Gulf of Mexico Shallow and Inland Water Segment:      Jackups and       Submersibles             34%     29%         52%   28%      66%      Inland Barges             47%     24%         75%   37%      71%Segment Total                   40%     27%         63%   33%      68%Total Mobile Offshore Drilling Fleet                 63%     57%         73%   61%      75%(1) Transocean completed a merger transaction with R&B Falcon on    January 31, 2001. Therefore, operating revenues, average dayrates    and utilization for the nine months ended September 30, 2001 are    stated as pro forma results based on the combined fleet of    Transocean 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, defined as    high-specification drillships and semisubmersibles (\"floaters\"),    other floaters, jackup rigs, drilling barges, tenders and    submersible drilling rigs.

Contact:
Transocean Inc., Houston
Analysts:
Jeffrey L. Chastain, 713/232-7551
or
Media:
Guy A. Cantwell, 713/232-7647

Source: Transocean Inc.