NYSE: RIG 4.39 0.15 3.3% 11:44 A.M. ET
Share Page Print Page
Back to all news articles

Transocean Inc. Reports First Quarter 2007 Financial Results

May 2, 2007
HOUSTON, May 02, 2007 (BUSINESS WIRE) -- Transocean Inc. (NYSE:RIG) today reported net income for the threemonths ended March 31, 2007 of $553 million, or $1.84 per dilutedshare, on record quarterly revenues of $1,328 million. The resultscompare to net income of $206 million, or $0.61 per diluted share, onrevenues of $817 million, for the three months ended March 31, 2006.Net income for the three months ended March 31, 2007 included anafter-tax gain of $20 million, or $0.07 per diluted share, resultingprimarily from the sale of the tender rig Charley Graves. The resultsfor the corresponding three months in 2006 included after-tax gainstotaling $43 million, or $0.12 per diluted share, resulting from thesale of two rigs.

Robert L. Long, Chief Executive Officer of Transocean Inc.,stated, \"Demand for deepwater drilling rigs continues to be strong andwe continue to benefit from the significant backlog we have built andthe ongoing rollover of contracts to higher and higher dayrates. Theexceptional results realized in the first quarter can be attributed inlarge part to great execution by our people in achieving significantlyimproved revenue efficiency fleet wide while continuing to improve oursafety performance as we strive for incident-free operations.\"

Operations Quarterly Review

Revenues for the three months ended March 31, 2007 increased 12%to $1,328 million compared to revenues of $1,186 million during thethree months ended December 31, 2006. This increase in revenues wasprimarily due to an improvement in average daily revenue, which rose15% to $198,000 from $171,700 during the three months ended December31, 2006, and increases in rig revenue efficiency. This improvementwas consistent across the company's fleet as several rigs commencednew contracts with dayrates that reflect the strong businessenvironment prevalent since mid-2004. In addition, first quarter 2007revenues were enhanced by increased activity as the semisubmersiblerig C.K. Rhein, Jr. commenced operations following the completion ofits reactivation project.

For the three months ended March 31, 2007, operating income beforegeneral and administrative expenses totaled $683 million, a 3% declinefrom $701 million reported for the fourth quarter of 2006. Thisdecline was due to gains of only $23 million on rig sales recognizedin the first quarter of 2007 compared to gains on rig sales of $183million recognized in the fourth quarter of 2006. Field operatingincome(1) (defined as revenues less operating and maintenanceexpenses) improved 23% to $760 million compared to $616 million overthe prior three-month period. The improvement in first quarter 2007field operating income was due chiefly to the strong revenue growthand also benefited from stable operating and maintenance expenses,which totaled $568 million during the first quarter of 2007 comparedto $570 million during the previous quarter in 2006.

Effective Tax Rate

The company's Annual Effective Tax Rate(2) for the three monthsended March 31, 2007 was 13.7%, excluding the previously mentionedimpact on income before income tax related to the gain from the rigsale as well as excluding from income tax expense on various discreteitems. The Effective Tax Rate(3) of 13.3% for the first quarter of2007 reflects the impact of the previously mentioned rig sale and a $2million favorable impact resulting from changes in estimates and theresolution of prior years' tax disputes in various jurisdictions. Thecompany currently expects the effective tax rate for the remainder of2007 to be approximately 14%, excluding the previously mentionedeffects on income before tax related to the gain from the rig sale andexcluding various discrete tax items.

Share Buyback

During the three months ended March 31, 2007, the companyrepurchased and retired $400 million of its ordinary shares, whichamounted to approximately 5.2 million ordinary shares at an averagepurchase price of $77.39 per share. As of April 30, 2007, the companyhad repurchased and retired a total of $3.4 billion of its ordinaryshares under the program, which amounted to approximately 47 millionordinary shares at an average purchase price of $72.48 per share. Thecompany has authority remaining to repurchase $600 million of itsordinary shares under the program.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m.Eastern Time on May 2, 2007. To participate, dial 913-312-1297 andrefer to confirmation code 6204914 approximately five to 10 minutesprior to the scheduled start time of the call.

In addition, the conference call will be simultaneously broadcastover the Internet in a listen-only mode and can be accessed by loggingonto the company's website at www.deepwater.com and selecting\"Investor Relations/News & Events/Webcasts & Presentations.\" A filecontaining four charts to be discussed during the conference call,titled \"1Q07 Charts,\" has been posted to the company's website and canalso be found by selecting \"Investor Relations/News & Events/Webcasts& Presentations.\" The conference call may also be accessed via theInternet at www.CompanyBoardroom.com by typing in the company's NewYork Stock Exchange trading symbol, \"RIG.\"

A telephonic replay of the conference call should be availableafter 1:00 p.m. Eastern Time on May 2, 2007 and can be accessed bydialing 719-457-0820 and referring to the passcode 6204914. Also, areplay will be available through the Internet and can be accessed byvisiting either of the above-referenced Worldwide Web addresses.

Forward-Looking Disclaimer

Statements regarding our backlog, market conditions, rig demand,our share repurchase plan, prospects for our business, as well as anyother statements that are not historical facts in this release, areforward-looking statements that involve certain risks, uncertaintiesand assumptions. These include but are not limited to operatinghazards and delays, risks associated with international operations,future financial results, actions by customers and other thirdparties, factors affecting the supply and demand of drilling rigs,including newbuilds, reactivations and the reallocation of currentrigs, factors affecting the duration of contracts includingwell-in-progress provisions, the actual amount of downtime, factorsresulting in reduced applicable dayrates, hurricanes and other weatherconditions, the future price of oil and gas and other factors detailedin the company's most recent Form 10-K and other filings with theSecurities and Exchange Commission. Should one or more of these risksor uncertainties materialize, or should underlying assumptions proveincorrect, actual results may vary materially from those indicated.

Transocean Inc. is the world's largest offshore drillingcontractor with a fleet of 82 mobile offshore drilling units. Thecompany's mobile offshore drilling fleet, consisting of a large numberof high-specification deepwater and harsh environment drilling units,is considered one of the most modern and versatile in the world due toits emphasis on technically demanding segments of the offshoredrilling business. The company's fleet consists of 33High-Specification Floaters (semisubmersibles and drillships), 20Other Floaters, 25 Jackups and other assets utilized in the support ofoffshore drilling activities worldwide. With a current equity marketcapitalization in excess of $24 billion, Transocean Inc.'s ordinaryshares are traded on the New York Stock Exchange under the symbol\"RIG.\"

1 For a reconciliation of operating income before general andadministrative expense to field operating income, see the accompanyingschedule entitled \"Non-GAAP Financial Measures and Reconciliations -Operating Income Before General and Administrative Expense to FieldOperating Income.\"

2 Annual Effective Tax Rate is defined as income tax expenseexcluding various discrete items (such as changes in estimates and taxon items excluded from income before income taxes) divided by incomebefore income taxes excluding gains on sales and similar itemspursuant to Financial Accounting Standards Board Interpretation No.18. See the accompanying schedule entitled \"Effective Tax RateAnalysis.\"

3 Effective Tax Rate is defined as income tax expense divided byincome before income taxes. See the accompanying schedule entitled\"Effective Tax Rate Analysis.\"

                   TRANSOCEAN INC. AND SUBSIDIARIES           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                 (In millions, except per share data)                             (Unaudited)                                        Three months ended March 31,                                        -----------------------------                                            2007           2006                                        -------------- --------------Operating Revenues  Contract drilling revenues                   $1,273           $779  Other revenues                                   55             38---------------------------------------------------------------------                                                1,328            817---------------------------------------------------------------------Costs and Expenses  Operating and maintenance                       568            475  Depreciation                                    100            102  General and administrative                       26             20---------------------------------------------------------------------                                                  694            597---------------------------------------------------------------------Gain from disposal of assets, net                  23             64---------------------------------------------------------------------Operating Income                                  657            284---------------------------------------------------------------------Other Income (Expense), net  Interest income                                   5              5  Interest expense, net of amounts   capitalized                                    (37)           (24)  Other, net                                       13              1---------------------------------------------------------------------                                                  (19)           (18)---------------------------------------------------------------------Income Before Income Taxes                        638            266  Income Tax Expense                               85             60---------------------------------------------------------------------Net Income                                       $553           $206=====================================================================Earnings Per Share   Basic                                        $1.90          $0.63   Diluted                                      $1.84          $0.61=====================================================================Weighted Average Shares Outstanding   Basic                                          290            325---------------------------------------------------------------------   Diluted                                        302            337---------------------------------------------------------------------
                   TRANSOCEAN INC. AND SUBSIDIARIES                CONDENSED CONSOLIDATED BALANCE SHEETS                   (In millions, except share data)                                          March 31,     December 31,                                            2007           2006                                        -------------- --------------                                         (Unaudited)                 ASSETSCash and Cash Equivalents                        $502           $467Accounts Receivable, net of allowance for doubtful accounts of $24 and $26 at March 31, 2007 and December 31, 2006, respectively                                   1,085            946Materials and Supplies, net of allowance for obsolescence of $21 and $19 at March 31, 2007 and December 31, 2006, respectively                                     168            160Deferred Income Taxes, net                         16             16Other Current Assets                               48             67---------------------------------------------------------------------  Total Current Assets                          1,819          1,656---------------------------------------------------------------------Property and Equipment                         10,866         10,539Less Accumulated Depreciation                   3,298          3,213---------------------------------------------------------------------  Property and Equipment, net                   7,568          7,326---------------------------------------------------------------------Goodwill                                        2,195          2,195Other Assets                                      301            299---------------------------------------------------------------------  Total Assets                                $11,883        $11,476=====================================================================  LIABILITIES AND SHAREHOLDERS' EQUITYAccounts Payable                                 $354           $477Accrued Income Taxes                              136             98Debt Due Within One Year                            -             95Other Current Liabilities                         469            369---------------------------------------------------------------------  Total Current Liabilities                       959          1,039---------------------------------------------------------------------Long-Term Debt                                  3,484          3,200Deferred Income Taxes, net                         52             54Other Long-Term Liabilities                       508            343---------------------------------------------------------------------  Total Long-Term Liabilities                   4,044          3,597---------------------------------------------------------------------Commitments and ContingenciesMinority Interest                                   2              4Preference 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, 288,053,348 and 292,454,457 shares issued and outstanding at March 31, 2007 and December 31, 2006, respectively                                       3              3Additional Paid-in Capital                      7,675          8,044Accumulated Other Comprehensive Loss              (30)           (30)Accumulated Deficit                              (770)        (1,181)---------------------------------------------------------------------  Total Shareholders' Equity                    6,878          6,836---------------------------------------------------------------------  Total Liabilities and Shareholders'   Equity                                     $11,883        $11,476=====================================================================
                   TRANSOCEAN INC. AND SUBSIDIARIES           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                            (In millions)                             (Unaudited)                                        Three months ended March 31,                                        ----------------------------                                            2007           2006                                        -------------- -------------Cash Flows from Operating Activities  Net income                                     $553          $206  Adjustments to reconcile net income to   net cash provided by operating   activities    Depreciation                                  100           102    Share-based compensation expense               10             3    Deferred income taxes                          (2)           34    Net gain from disposal of assets              (23)          (64)    Deferred income, net                           34             9    Deferred expenses, net                         (7)           (8)    Other long-term liabilities                     7             7    Other, net                                     (1)            1    Changes in operating assets and     liabilities      Accounts receivable                        (139)          (71)      Accounts payable and other current       liabilities                                 83            44      Income taxes receivable/payable,       net                                         43             6      Other current assets                         (4)           (1)--------------------------------------------------------------------Net Cash Provided by Operating Activities                                       654           268--------------------------------------------------------------------Cash Flows from Investing Activities  Capital expenditures                           (465)         (178)  Proceeds from disposal of assets, net            39            82  Joint ventures and other investments,   net                                             (3)            ---------------------------------------------------------------------Net Cash Used in Investing Activities            (429)          (96)--------------------------------------------------------------------Cash Flows from Financing Activities  Borrowings under the Revolving Credit   Facility, net                                  190             -  Net proceeds from issuance of ordinary   shares under share-based compensation   plans                                           15            45  Repurchase of ordinary shares                  (400)         (200)  Other, net                                        5             ---------------------------------------------------------------------Net Cash Used in Financing Activities            (190)         (155)--------------------------------------------------------------------Net Increase in Cash and Cash Equivalents                                       35            17--------------------------------------------------------------------Cash and Cash Equivalents at Beginning of Period                                        467           445--------------------------------------------------------------------Cash and Cash Equivalents at End of Period                                          $502          $462====================================================================
                   Transocean Inc. and Subsidiaries                      Fleet Operating Statistics                             Operating Revenues (in millions) (1)                         --------------------------------------------                                      Three months ended                         --------------------------------------------Transocean Drilling        March 31,     December 31,    March 31, Segment:                     2007           2006           2006                         -------------- -------------- --------------Contract Drilling Revenues  High-Specification   Floaters:    Ultra-Deepwater     Floaters                     $340           $304           $225    Other Deepwater     Floaters                      260            264            172    Other High-     Specification     Floaters                       85             66             51  Total High-   Specification Floaters          685            634            448  Other Floaters                   379            296            166  Jackups                          194            199            143  Other Rigs                        15             18             21Subtotal                         1,273          1,147            778Other Revenues  Client Reimbursable   Revenues                         38             32             25  Integrated Services and   Other                            17              7             14Subtotal                            55             39             39Total Company                   $1,328         $1,186           $817                                     Average Dayrates (1)                         --------------------------------------------                                      Three months ended                         --------------------------------------------Transocean Drilling        March 31,     December 31,    March 31, Segment:                     2007           2006           2006                         -------------- -------------- --------------  High-Specification   Floaters:    Ultra-Deepwater     Floaters                 $301,400       $275,300       $209,000    Other Deepwater     Floaters                 $235,800       $230,400       $154,000    Other High-     Specification     Floaters                 $238,800       $187,400       $158,800  Total High-   Specification Floaters     $264,800       $243,600       $178,200  Other Floaters              $223,700       $178,400       $110,000  Jackups                     $104,600        $97,000        $70,300  Other Rigs                   $50,300        $48,200        $47,300Total Drilling Fleet          $198,000       $171,700       $119,600                                       Utilization (1)                         --------------------------------------------                                      Three Months Ended                         --------------------------------------------                           March 31,     December 31,    March 31,                              2007           2006           2006                         -------------- -------------- --------------Transocean Drilling Segment:  High-Specification   Floaters:    Ultra Deepwater     Floaters                       97%            92%            92%    Other Deepwater     Floaters                       77%            78%            83%    Other High-     Specification     Floaters                       99%            97%            89%  Total High-   Specification Floaters           87%            86%            87%  Other Floaters                    94%            90%            73%  Jackups                           83%            89%            91%  Other Rigs                       100%            99%            58%Total Drilling Fleet                88%            89%            82%(1) Average daily revenue is defined as contract drilling revenue earned per revenue earning day in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement of operations. Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in our fleet.
                   Transocean Inc. and Subsidiaries           Non-GAAP Financial Measures and Reconciliations      Operating Income Before General and Administrative Expense                      to Field Operating Income                            (In millions)                                         Three Months Ended                               --------------------------------------                                March 31,   December 31,   March 31,                                  2007         2006          2006                               ----------- -------------- -----------Transocean Drilling Segment    Operating     revenue                       $1,328         $1,186        $817    Operating and maintenance     expense                          568            570         475    Depreciation                      100             98         102    (Gain) loss from disposal     of assets, net                   (23)          (183)        (64)                               ----------- -------------- -----------  Operating income before   general and administrative   expense                            683            701         304  Add back   (subtract):  Depreciation          100             98         102                (Gain) loss                 from disposal                 of assets,                 net                  (23)          (183)        (64)                               ----------- -------------- -----------  Field   operating   income                            $760           $616        $342                               ----------- -------------- -----------
                   Transocean Inc. and Subsidiaries                     Effective Tax Rate Analysis                            (In millions)                                                             Twelve                                                             Months                                   Three Months Ended         Ended                              ----------------------------- ---------                              March 31,  Dec. 31  March 31,  Dec. 31                                2007      2006      2006      2006                              --------- --------- --------- ---------Income (Loss) before Income Taxes and Minority Interest      $638      $693      $266    $1,607  Add back (subtract):    Gain on sale of assets         (23)     (191)      (65)     (410)    Income from TODCO tax     sharing agreement               -       (51)        -       (51)                              --------- --------- --------- ---------Adjusted Income before Income Taxes                            $615      $451      $201    $1,146Income Tax Expense                 $85       $72       $60      $222  Add back (subtract):    Gain on sale of assets          (3)        1       (22)      (24)    Changes in estimates (1)         2        17        (3)       14                              --------- --------- --------- ---------Adjusted Income Tax Expense (2)                               $84       $90       $35      $212Effective Tax Rate (3)            13.3%     10.4%     22.7%     13.8%Annual Effective Tax Rate (4)     13.7%     20.0%     17.6%     18.5%(1) Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in deferred taxes, valuation allowances on deferred taxes and other tax liabilities.(2) The three months ended December 31, 2006 include $7 million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate.(3) Effective Tax Rate is income tax expense divided by income before income taxes.(4) Annual Effective Tax Rate is 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 taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18.

SOURCE: Transocean Inc.

Transocean Inc., Houston
Analyst Contact:
John Briscoe, 713-232-7551
or
Media Contact:
Guy A. Cantwell, 713-232-7647