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Press release from Marketwire

Transocean Ltd. Reports Fourth Quarter and Full-Year 2010 Results

Wednesday, February 23, 2011

Transocean Ltd. Reports Fourth Quarter and Full-Year 2010 Results16:04 EST Wednesday, February 23, 2011ZUG, SWITZERLAND--(Marketwire - February 23, 2011) - Transocean Ltd. (NYSE: RIG) (SIX: RIGN)today reported a net loss attributable to controlling interest for thethree months ended December 31, 2010 of $799 million or $2.51 per dilutedshare. The results compare to net income attributable to controllinginterest of $723 million, or $2.24 per diluted share for the three monthsended December 31, 2009.Fourth Quarter 2010Fourth quarter 2010 results were adversely impacted by $1.017 billion ofafter tax items, or $3.19 per diluted share, which include:-- An after-tax, non-cash charge of $1.010 billion, or $3.16 per diluted share. The charge resulted from an impairment of our Standard Jackup asset group. Calculated based on U.S. Generally Accepted Accounting Principles, the charge is due to a current and projected decline in dayrates and utilization that has adversely impacted this asset group.-- a $13 million loss on retirement of debt associated with repurchases of a portion of our convertible senior notes, and-- $6 million of income as a result of the TODCO tax sharing agreement and other matters.Fourth quarter 2010 results also included expenses associated with theMacondo well incident of $28 million, or $25 million, after tax, or $0.08per diluted share. These expenses include legal and internal investigationcosts, professional fees and increased insurance premiums.Full Year 2010For the year ended December 31, 2010, net income attributable tocontrolling interest totaled $961 million, or $2.99 per diluted share. Netincome for the year ended December 31, 2010 included after-tax charges of$854 million, or $2.65 per diluted share, resulting primarily from the$1.010 billion impairment of our Standard Jackups. Other charges for thefull year totaled $111 million and included litigation matters, animpairment of oil and gas properties, a loss on the sale of two rigs andlosses on the early retirement of debt and other matters. Partiallyoffsetting these charges was a $267 million after-tax gain resulting frominsurance recoveries associated with the loss of the Deepwater Horizon.Full-year 2010 results also included additional expenses associated withthe Macondo well incident of $137 million, or $116 million after tax, or$0.36 per diluted share. These expenses include legal costs, internalinvestigation costs, professional fees and increased insurance premiums.For 2009, net income attributable to controlling interest was $3.181billion, or $9.84 per diluted share. Net income for the year ended December31, 2009 included after-tax charges of $498 million, or $1.55 per dilutedshare, resulting primarily from impairments of intangible assets and tworigs held for sale, litigation matters, losses on the early retirement ofdebt and adjustments associated with the GlobalSantaFe merger. Thesecharges were partially offset by gains on the sale of our interest in ajoint venture and settlements of certain tax matters.Operations Quarterly ReviewRevenues for the three months ended December 31, 2010 were $2.160 billion,compared to revenues of $2.309 billion during the three months endedSeptember 30, 2010. The $149 million decrease was primarily due to:-- $90 million of decreased utilization, primarily from rigs that were stacked or idled,-- a $52 million charge related to a customer dispute in the U.S. Gulf of Mexico,-- $41 million from increased shipyard activity,-- $18 million of reduced revenue on completion of the GSF Arctic IV charter,-- offset by $44 million due to increased drilling management services revenue, and-- $8 million of other net favorable variances.Operating and maintenance expenses totaled $1.352 billion for the fourthquarter 2010, up approximately 11 percent compared to $1.213 billion forthe prior quarter. The $139 million quarter-to-quarter increase inoperating and maintenance costs was primarily due to:-- $73 million of increased shipyard and contract preparation costs,-- $35 million of increased costs associated with drilling management services activity,-- $34 million resulting from increased maintenance expense,-- offset by $3 million of net favorable variances.General and administrative expenses were $67 million for the fourth quarter2010 compared to $59 million in the previous quarter. The $8 millionincrease was due, in part, to increases in non-rig related insurance costsand other miscellaneous items.Liquidity and Interest ExpenseInterest expense, net of amounts capitalized for the fourth quarter 2010,was $152 million, compared to $142 million in the third quarter 2010,reflecting the full quarter impact of the issuance of $2 billion of newsenior notes during the third quarter. Interest expense, for the full year2010 net of amounts capitalized, was $567 million, compared to $484 millionfor the full year 2009. The increase in interest expense was mainly due tolower capitalized interest expense in 2010.Cash flow from operating activities increased to $796 million for thefourth quarter 2010 compared to $709 million for the third quarter 2010.For the full year 2010, cash flow from operating activities totaled $3.946billion compared to $5.598 billion for the full year 2009.Effective Tax RateTransocean's Annual Effective Tax Rate(1), which excludes various discreteitems, for the fourth quarter 2010 and the full year ended December 31,2010 was a benefit of 18.7 percent and an expense of 13.8 percent,respectively. The Effective Tax Rate(2) for the fourth quarter 2010 and thefull year ended December 31, 2010 was 4.1 percent and 23.9 percent,respectively. Transocean's Effective Tax Rate reflects the impact ofchanges in estimates as well as the impact of impairments. The decline inthe Annual Effective Tax Rate for the full year 2010 was due to a taxbenefit realized in the fourth quarter resulting primarily from therelocation of certain rigs.Conference Call InformationTransocean will conduct a teleconference call at 10:00 a.m. EST, 4:00 p.m.Swiss time, on February 24, 2011. To participate, dial +1 719-325-2327 andrefer to confirmation code 1432993 approximately five to 10 minutes priorto the scheduled start time of the call.In addition, the conference call will be simultaneously broadcast over theInternet in a listen-only mode and can be accessed by logging ontoTransocean's website at www.deepwater.com and selecting "InvestorRelations." A file containing four charts to be discussed during theconference call, titled "4Q10 Charts," has been posted to Transocean'swebsite and can also be found by selecting "Investor Relations/QuarterlyToolkit." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchangetrading symbol, "RIG."A telephonic replay of the conference call should beavailable after 1:00 p.m. EST, 7:00 p.m. Swiss time, on February 24, 2011,and can be accessed by dialing +1 719-457-0820 and referring to thepasscode 1432993. Also, a replay will be available through the Internet andcan be accessed by visiting either of the above-referenced Worldwide Webaddresses. Both replay options will be available for approximately 30 days.About TransoceanTransocean is the world's largest offshore drilling contractor and theleading provider of drilling management services worldwide. With a fleet of138 mobile offshore drilling units as well as one ultra-deepwater drillshipand three high-specification jackups under construction, Transocean's fleetis considered one of the most modern and versatile in the world due to itsemphasis on technically demanding segments of the offshore drillingbusiness. Transocean owns or operates a contract drilling fleet of 47High-Specification Floaters (Ultra-Deepwater, Deepwater andHarsh-Environment semisubmersibles and drillships), 25 Midwater Floaters,nineHigh-Specification Jackups, 54 Standard Jackups and other assets utilizedin the support of offshore drilling activities worldwide.(1) Annual Effective Tax Rate is defined as income tax expense excludingvarious discrete items (such as changes in estimates and tax on itemsexcluded from income before income tax expense) divided by income beforeincome tax expense excluding gains on sales and similar items pursuant tothe accounting standards for income taxes and estimating the annualeffective tax rate. See the accompanying schedule entitled "SupplementalEffective Tax Rate Analysis."(2) Effective Tax Rate is defined as income tax expense divided by incomebefore income taxes. See the accompanying schedule entitled "SupplementalEffective Tax Rate Analysis."For more information about Transocean, please visit our website at www.deepwater.com. TRANSOCEAN LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three months ended Twelve months ended December 31, December 31, ------------------ ------------------ 2010 2009 2010 2009 -------- -------- -------- --------Operating revenuesContract drilling revenues $ 2,032 $ 2,546 $ 8,967 $ 10,607Contract drilling intangible revenues 13 44 98 281Other revenues 115 143 511 668 -------- -------- -------- --------2,160 2,733 9,576 11,556 -------- -------- -------- --------Costs and expensesOperating and maintenance 1,352 1,296 5,119 5,140Depreciation, depletion and amortization 394 382 1,589 1,464General and administrative 67 46 247 209 -------- -------- -------- -------- 1,813 1,724 6,955 6,813 -------- -------- -------- --------Loss on impairment (1,010) -- (1,012) (334)Gain (loss) on disposal of assets, net 1 (6) 257 (9) -------- -------- -------- --------Operating income (662) 1,003 1,866 4,400 -------- -------- -------- --------Other income (expense), netInterest income 6 3 23 5Interest expense, net of amounts capitalized (152) (119) (567) (484)Loss on retirement of debt (13) (12) (33) (29)Other, net (8) 23 10 32 -------- -------- -------- -------- (167) (105) (567) (476) -------- -------- -------- --------Income (loss) before income tax expense (829) 898 1,299 3,924Income tax expense (benefit) (34) 181 311 754 -------- -------- -------- --------Net income (loss) (795) 717 988 3,170Net income (loss) attributable to noncontrolling interest 4 (6) 27 (11) -------- -------- -------- --------Net income (loss) attributable to controlling interest $ (799) $ 723 $ 961 $ 3,181 ======== ======== ======== ========Earnings per shareBasic $ (2.51) $ 2.24 $ 2.99 $ 9.87Diluted $ (2.51) $ 2.24 $ 2.99 $ 9.84Weighted average shares outstandingBasic 319 321 320 320Diluted 319 322 320 321 TRANSOCEAN LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data) December 31, ------------------ 2010 2009 -------- --------AssetsCash and cash equivalents $ 3,394 $ 1,130Accounts receivable, netTrade 1,811 2,330Other 189 55Materials and supplies, net 517 462Deferred income taxes, net 115 104Assets held for sale -- 186Other current assets 169 209 -------- --------Total current assets 6,195 4,476 -------- --------Property and equipment 27,007 27,383Property and equipment of consolidated variable interest entities 2,214 1,968Less accumulated depreciation 7,763 6,333 -------- --------Property and equipment, net 21,458 23,018 -------- --------Goodwill 8,132 8,134Other assets 1,026 808 -------- --------Total assets $ 36,811 $ 36,436 ======== ========Liabilities and equityAccounts payable $ 847 $ 780Accrued income taxes 116 240Debt due within one year 1,917 1,568Debt of consolidated variable interest entities due within one year 95 300Other current liabilities 861 730 -------- --------Total current liabilities 3,836 3,618 -------- --------Long-term debt 8,354 8,966Long-term debt of consolidated variable interest entities 855 883Deferred income taxes, net 594 726Other long-term liabilities 1,772 1,684 -------- --------Total long-term liabilities 11,575 12,259 -------- --------Commitments and contingenciesRedeemable noncontrolling interest 25 --Shares, CHF 15.00 par value, 335,235,298 authorized, 167,617,649 conditionally authorized, 335,235,298 issued and 319,080,678 outstanding at December 31, 2010; and 502,852,947 authorized; 167,617,649 conditionally authorized, 335,235,298 issued and 321,223,882 outstanding at December 31, 2009 4,482 4,472Additional paid-in capital 7,504 7,407Treasury shares, at cost, 2,863,267 and none held at December 31, 2010 and 2009, respectively (240) --Retained earnings 9,969 9,008Accumulated other comprehensive loss (332) (335) -------- --------Total controlling interest shareholders' equity 21,383 20,552 -------- --------Noncontrolling interest (8) 7 -------- --------Total equity 21,375 20,559 -------- --------Total liabilities and equity $ 36,811 $ 36,436 ======== ======== TRANSOCEAN LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Three months ended Twelve months ended December 31, December 31, ------------------ ------------------ 2010 2009 2010 2009 -------- -------- -------- --------Cash flows from operating activitiesNet income (loss) $ (795) $ 717 $ 988 $ 3,170Adjustments to reconcile net income to net cash provided by operating activities:Amortization of drilling contract intangibles (13) (44) (98) (281)Depreciation, depletion and amortization 394 382 1,589 1,464Share-based compensation expense 23 15 102 81Excess tax benefit from share-based compensation plans - 8 (1) (2)(Gain) loss on disposal of assets, net (1) 6 (257) 9Loss on impairment 1,010 - 1,012 334Loss on retirement of debt 13 12 33 29Amortization of debt issue costs, discounts and premiums, net 41 49 189 209Deferred income taxes (71) (37) (145) 13Other, net (2) (23) (1) 7Deferred revenue, net - 97 205 169Deferred expenses, net (24) - (79) (38)Changes in operating assets and liabilities 221 (7) 409 434 -------- -------- -------- --------Net cash provided by operating activities 796 1,175 3,946 5,598 -------- -------- -------- --------Cash flows from investing activitiesCapital expenditures (428) (857) (1,411) (3,052)Proceeds from disposal of assets, net 9 8 60 18Proceeds from insurance recoveries for loss of drilling unit - - 560 -Proceeds from payments on notes receivable 6 - 37 -Proceeds from short-term investments 32 142 37 564Purchases of short-term investments - (1) - (269)Joint ventures and other investments, net 1 40 (4) 45 -------- -------- -------- --------Net cash used in investing activities (380) (668) (721) (2,694) -------- -------- -------- --------Cash flows from financing activitiesChange in short-term borrowings, net (62) (136) (193) (382)Proceeds from debt - 169 2,054 514Repayments of debt (1,599) (288) (2,565) (2,871)Purchases of shares held in treasury - - (240) -Financing costs - - (15) (2)Proceeds from (taxes paid for) share-based compensation plans, net 2 1 (1) 17Excess tax benefit from share-based compensation plans - (8) 1 2Other, net 1 (1) (2) (15) -------- -------- -------- --------Net cash used in financing activities (1,658) (263) (961) (2,737) -------- -------- -------- --------Net increase (decrease) in cash and cash equivalents (1,242) 244 2,264 167Cash and cash equivalents at beginning of period 4,636 886 1,130 963 -------- -------- -------- --------Cash and cash equivalents at end of period $ 3,394 $ 1,130 $ 3,394 $ 1,130 ======== ======== ======== ======== TRANSOCEAN LTD. FLEET OPERATING STATISTICS Operating Revenues ($ Millions) (1) ------------------------------------------------ Twelve months Three months ended ended December 31, ---------------------------- ------------------ December September December 31, 2010 30, 2010 31, 2009 2010 2009 -------- -------- -------- -------- --------Contract Drilling Revenues High-Specification Floaters: Ultra Deepwater Floaters $ 740 $ 720 $ 890 $ 3,171 $ 2,997 Deepwater Floaters 339 350 449 1,461 1,731 Harsh Environment Floaters 155 178 155 674 613 Total High- Specification Floaters 1,234 1,248 1,494 5,306 5,341 Midwater Floaters 477 572 537 2,093 2,507 High-Specification Jackups 56 78 86 320 469 Standard Jackups 259 298 422 1,222 2,257 Other Rigs 6 8 7 26 33Subtotal 2,032 2,204 2,546 8,967 10,607Contract Intangible Revenue 13 23 44 98 281Other Revenues Client Reimbursable Revenues 34 40 46 152 194 Integrated Services and Other 15 10 48 68 206 Drilling Management Services 57 25 41 261 239 Oil and Gas Properties 9 7 8 30 29Subtotal 115 82 143 511 668Total Company $ 2,160 $ 2,309 $ 2,733 $ 9,576 $ 11,556 Average Daily Revenue (1) ------------------------------------------------ Twelve months ended Three months ended December 31, ---------------------------- ------------------ December September December 31, 2010 30, 2010 31, 2009 2010 2009 -------- -------- -------- -------- -------- High-Specification Floaters: Ultra Deepwater Floaters $435,900 $422,800 $486,200 $457,300 $462,700 Deepwater Floaters $395,600 $365,600 $346,600 $384,900 $344,900 Harsh Environment Floaters $366,800 $414,100 $405,800 $401,900 $378,000 Total High- Specification Floaters $414,500 $403,900 $425,900 $427,600 $407,200 Midwater Floaters $298,500 $328,400 $325,100 $319,600 $322,800 High-Specification Jackups $162,600 $138,100 $175,100 $152,000 $166,300 Standard Jackups $110,600 $113,200 $147,300 $118,700 $152,600 Other Rigs $ 73,000 $ 72,900 $ 72,300 $ 72,700 $ 54,700Total Drilling Fleet $276,600 $271,200 $295,700 $282,700 $271,400 Utilization (1) ------------------------------------------------ Twelve months ended Three months ended December 31, ---------------------------- ------------------ December September December 31, 2010 30, 2010 31, 2009 2010 2009 -------- -------- -------- -------- -------- High-Specification Floaters: Ultra Deepwater Floaters 76% 77% 91% 79% 92% Deepwater Floaters 58% 65% 88% 65% 86% Harsh Environment Floaters 92% 93% 83% 92% 89% Total High- Specification Floaters 71% 75% 89% 76% 89% Midwater Floaters 68% 73% 69% 69% 79% High-Specification Jackups 38% 61% 53% 58% 77% Standard Jackups 46% 52% 57% 51% 74% Other Rigs 48% 50% 50% 49% 66%Total Drilling Fleet 58% 64% 69% 63% 80%(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 Ltd. and Subsidiaries Supplemental Effective Tax Rate Analysis (In millions) Three months ended Twelve months ended ---------------------------- ------------------ Dec 31, Sept 30, Dec 31, Dec 31, Dec 31, 2010 2010 2009 2010 2009 -------- -------- -------- -------- --------Income before income taxes $ (829) $ 497 $ 898 $ 1,299 $ 3,924 Add back (subtract): Litigation matters 1 14 (24) 27 108 Gain on loss of Deepwater Horizon - - - (267) - (Gain) Loss on disposal of other assets, net - - - 14 (2) Loss on impairment of other assets, net 1,010 - - 1,012 334 Loss of impairment of oil and gas properties - - - 21 - GSF merger related costs and other, net (8) - 4 (2) 5 (Gain) loss on retirement of debt 13 22 12 33 29 Gain on sale of interests in joint ventures - - (34) - (30) -------- -------- -------- -------- --------Adjusted income before income taxes 187 533 856 2,137 4,368Income tax expense (34) 118 181 311 754 Add back (subtract): Loss of impairment of oil and gas properties - - - 7 - Loss on impairment of other assets, net - - 18 - 18 GSF merger related costs - - - 1 2 Tax effect of the Patient Proctection and Affordable Care Act - - - (2) - Changes in estimates (1) (1) (7) (50) (21) (74) -------- -------- -------- -------- --------Adjusted income tax expense (2) $ (35) $ 111 $ 149 $ 296 $ 700 ======== ======== ======== ======== ========Effective Tax Rate (3) 4.1% 23.8% 20.1% 23.9% 19.2%Annual Effective Tax Rate (4) -18.7% 20.8% 17.4% 13.8% 16.0%(1) Our estimates change as we file tax returns, settle disputes with taxauthorities 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 December 31, 2010 includes ($61) million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate.(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 and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate.FOR FURTHER INFORMATION PLEASE CONTACT: Gregory S. PanagosAnalyst Contact:+1 713-232-7551ORGuy A. CantwellMedia Contact:+1 713-232-7647