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Press release from Marketwire

Transocean Ltd. Reports First Quarter 2011 Results

Wednesday, May 04, 2011

Transocean Ltd. Reports First Quarter 2011 Results16:15 EDT Wednesday, May 04, 2011ZUG, SWITZERLAND--(Marketwire - May 04, 2011) - Transocean Ltd. (NYSE: RIG) (SIX: RIGN)today reported net income attributable to controlling interest of $310million, or $0.96 per diluted share, for the three months ended March 31,2011. The results compare to net income attributable to controllinginterest of $677 million, or $2.09 per diluted share for the three monthsended March 31, 2010.First quarter 2011 results included the following items, after tax, thatresulted in a net positive impact of approximately $139 million, or $0.43per diluted share:-- $176 million of income from discontinued operations, nearly all of which is from the gain on the sale of the Trident 20,-- $9 million from the gain on the sale of the Transocean Mercury,-- $8 million of net charges related to litigation matters not associated with the Macondo well incident, and-- $38 million of net charges primarily related to discrete tax items.First quarter 2011 results also included expenses associated with theMacondo well incident of $23 million, $19 million after tax, or $0.06 perdiluted share. These expenses were primarily related to increased insurancepremiums and legal costs.Operations Quarterly ReviewRevenues for the three months ended March 31, 2011 were $2.144 billion,compared to revenues of $2.127 billion during the three months endedDecember 31, 2010. First quarter contract drilling revenues were impactedby lower utilization and revenue efficiency. Our Deepwater and MidwaterFloater fleets experienced lower utilization due to the stacking of rigs,as well as increased shipyard time related to contract preparation, specialperiodic surveys and major maintenance projects. Compliance with new wellcontrol equipment certification requirements, higher standards forequipment condition and capacity constraints on our vendors contributed toreduced revenue efficiency among our Ultra-Deepwater and DeepwaterFloaters. Partially offsetting lower contract drilling revenue wasadditional revenue from two newbuild rigs commencing operations. Otherrevenues increased primarily from additional drilling management servicesactivity.Operating and maintenance expenses totaled $1.359 billion for the firstquarter 2011, up slightly from $1.339 billion for the prior quarter. Thechange was due to increased drilling management services activity, whichwas partially offset by reduced rig-related maintenance costs.Depreciation and amortization expense was $354 million in the first quarter2011 compared to $381 million in the prior quarter. The $27 milliondecrease was primarily due to the reduced carrying amounts of our StandardJackups resulting from the approximately $1 billion asset impairmentrecognized on that asset group during the fourth quarter 2010.Liquidity and Interest ExpenseInterest expense, net of amounts capitalized for the first quarter 2011,was $145 million, compared to $152 million in the fourth quarter 2010.Cash flow from operating activities decreased to $390 million for the firstquarter 2011 compared to $796 million for the fourth quarter 2010. Thedecline in cash flow from operations resulted primarily from an increase inworking capital.Effective Tax RateTransocean's Annual Effective Tax Rate(1) for the first quarter 2011, whichexcludes various discrete items, was 19.3 percent. The Effective Tax Rate(2)for the first quarter was 33.1 percent, primarily reflecting the impact ofdiscrete items resulting from changes in estimates.Conference Call InformationTransocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m.CEST, on May 5, 2011. To participate, dial +1 719-325-2234 and refer toconfirmation code 8570996 approximately five to 10 minutes prior to thescheduled 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 "1Q11 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 be available after 1:00p.m. EDT, 7:00 p.m. CEST, on May 5, 2011, and can be accessed by dialing +1719-457-0820 or +1 888-203-1112 and referring to the confirmation code8570996. Also, a replay will be available through the Internet and can beaccessed by visiting either of the above-referenced internet addresses.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 of137 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, 53 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 SUBSIDIARIIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three months ended March 31, ------------------------ 2011 2010 ----------- ----------- (As adjusted)Operating revenues Contract drilling revenues $ 1,950 $ 2,425 Contract drilling intangible revenues 10 33 Other revenues 184 121 ----------- ----------- 2,144 2,579 ----------- -----------Costs and expenses Operating and maintenance 1,359 1,186 Depreciation and amortization 354 374 General and administrative 67 63 ----------- ----------- 1,780 1,623 ----------- -----------Gain (loss) on disposal of assets, net 8 (14) ----------- -----------Operating income 372 942 ----------- -----------Other income (expense), net Interest income 15 5 Interest expense, net of amounts capitalized (145) (132) Other, net 3 15 ----------- ----------- (127) (112) ----------- -----------Income from continuing operations before income tax expense 245 830Income tax expense 81 147 ----------- -----------Income from continuing operations 164 683Income from discontinued operations, net of tax 176 2 ----------- -----------Net income 340 685Net income attributable to noncontrolling interest 30 8 ----------- -----------Net income attributable to controlling interest $ 310 $ 677 =========== ===========Earnings per share-basic Earnings from continuing operations $ 0.42 $ 2.09Earnings from discontinued operations 0.54 0.01 ----------- ----------- Earnings per share 0.96 2.10 =========== ===========Earnings per share-diluted Earnings from continuing operations $ 0.42 $ 2.08 Earnings from discontinued operations 0.54 0.01 ----------- ----------- Earnings per share 0.96 2.09 =========== ===========Weighted-average shares outstanding Basic 319 321 Diluted 320 322 TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data) (Unaudited) March 31, December 31, 2011 2010 ----------- ----------- (As adjusted)AssetsCash and cash equivalents $ 3,812 $ 3,394Accounts receivable, net of allowance for doubtful accounts of $33 and $38 at March 31, 2011 and December 31, 2010, respectively 2,161 1,978Materials and supplies, net of allowance for obsolescence of $70 at March 31, 2011 and December 31, 2010 541 514Deferred income taxes, net 116 115Assets held for sale 77 --Other current assets 197 194 ----------- ----------- Total current assets 6,904 6,195 ----------- -----------Property and equipment 26,819 26,721Property and equipment of consolidated variable interest entities 2,241 2,214Less accumulated depreciation 7,887 7,616 ----------- ----------- Property and equipment, net 21,173 21,319 ----------- -----------Goodwill 8,132 8,132Other assets 1,001 1,165 ----------- ----------- Total assets $ 37,210 $ 36,811 =========== ===========Liabilities and equityAccounts payable $ 808 $ 832Accrued income taxes 67 109Debt due within one year 1,965 1,917Debt of consolidated variable interest entities due within one year 95 95Other current liabilities 906 883 ----------- ----------- Total current liabilities 3,841 3,836 ----------- -----------Long-term debt 8,361 8,354Long-term debt of consolidated variable interest entities 820 855Deferred income taxes, net 586 575Other long-term liabilities 1,840 1,791 ----------- ----------- Total long-term liabilities 11,607 11,575 ----------- -----------Commitments and contingenciesRedeemable noncontrolling interest 57 25Shares, CHF 15.00 par value, 335,235,298 authorized, 167,617,649 conditionally authorized, 335,235,298 issued at March 31, 2011 and December 31, 2010; 319,538,901 and 319,080,678 outstanding at March 31, 2011 and December 31, 2010, respectively 4,488 4,482Additional paid-in capital 7,518 7,504Treasury shares, at cost, 2,863,267 held at March 31, 2011 and December 31, 2010 (240) (240)Retained earnings 10,279 9,969Accumulated other comprehensive loss (335) (332) ----------- ----------- Total controlling interest shareholders' equity 21,710 21,383 ----------- ----------- Noncontrolling interest (5) (8) ----------- ----------- Total equity 21,705 21,375 ----------- ----------- Total liabilities and equity $ 37,210 $ 36,811 =========== =========== TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three months ended March 31, ------------------------ 2011 2010 ----------- ----------- (As adjusted)Cash flows from operating activities Net income $ 340 $ 685 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of drilling contract intangibles (10) (33) Depreciation and amortization 354 374 Share-based compensation expense 27 35 Gain on disposal of discontinued operations (173) -- (Gain) loss on disposal of assets, net (8) 14 Amortization of debt issue costs, discounts and premiums, net 26 49 Deferred income taxes 11 (22) Other, net (3) 31 Deferred revenue, net 46 151 Deferred expenses, net (36) (14) Changes in operating assets and liabilities (184) (98) ----------- -----------Net cash provided by operating activities 390 1,172 ----------- -----------Cash flows from investing activities Capital expenditures (240) (369) Proceeds from disposal of assets, net 13 41 Proceeds from disposal of discontinued operations 259 -- Other, net (6) 5 ----------- -----------Net cash provided by (used in) investing activities 26 (323) ----------- -----------Cash flows from financing activities Change in short-term borrowings, net 51 (131) Proceeds from debt 5 54 Repayments of debt (47) (253) Purchases of shares held in treasury -- (60) Other, net (7) (3) ----------- -----------Net cash provided by (used in) financing activities 2 (393) ----------- -----------Net increase in cash and cash equivalents 418 456 ----------- -----------Cash and cash equivalents at beginning of period 3,394 1,130 ----------- -----------Cash and cash equivalents at end of period $ 3,812 $ 1,586 =========== =========== TRANSOCEAN LTD. FLEET OPERATING STATISTICS Operating Revenues ($ Millions) (1) ------------------------------------- Three months ended -------------------------------------March 31, December 31, March 31, 2011 2010 2010 ----------- ----------- -----------Contract Drilling Revenues High-Specification Floaters: Ultra Deepwater Floaters $ 844 $ 740 $ 901 Deepwater Floaters 290 339 390 Harsh Environment Floaters 150 155 176 Total High-Specification Floaters 1,284 1,234 1,467 Midwater Floaters 400 477 522 High-Specification Jackups 31 33 77 Standard Jackups 229 259 352 Other Rigs 6 6 7Subtotal 1,950 2,009 2,425Contract Intangible Revenue 10 13 33Other Revenues Client Reimbursable Revenues 37 34 40 Integrated Services and Other 15 15 30 Drilling Management Services 132 56 51Subtotal 184 105 121Total Company $ 2,144 $ 2,127 $ 2,579 Average Daily Revenue (1) ------------------------------------- Three months ended ------------------------------------- March 31, December 31, March 31, 2011 2010 2010 ----------- ----------- ----------- High-Specification Floaters: Ultra Deepwater Floaters $ 467,700 $ 435,900 $ 486,000 Deepwater Floaters $ 395,900 $ 395,600 $ 383,800 Harsh Environment Floaters $ 402,400 $ 366,800 $ 400,100 Total High-Specification Floaters $ 441,300 $ 414,500 $ 443,200 Midwater Floaters $ 313,000 $ 298,500 $ 331,600 High-Specification Jackups $ 106,200 $ 129,400 $ 162,600 Standard Jackups $ 109,200 $ 110,600 $ 133,100 Other Rigs $ 73,400 $ 73,000 $ 72,700Total Drilling Fleet $ 292,600 $ 276,900 $ 299,600 Utilization (1) ------------------------------------- Three months ended ------------------------------------- March 31, December 31, March 31, 2011 2010 2010 ----------- ----------- ----------- High-Specification Floaters: Ultra Deepwater Floaters 77% 76% 88% Deepwater Floaters 51% 58% 71% Harsh Environment Floaters 83% 92% 98% Total High-Specification Floaters 69% 71% 83% Midwater Floaters 60% 68% 67% High-Specification Jackups 40% 31% 59% Standard Jackups 43% 46% 53% Other Rigs 49% 48% 50%Total Drilling Fleet 55% 58% 66% Transocean Ltd. and Subsidiaries Supplemental Effective Tax Rate Analysis (In US$ millions) ------------------------------------- Three months ended ------------------------------------- Mar 31, Dec 31, Mar 31, 2011 2010 2010 ----------- ----------- ----------- (As adjusted)(As adjusted)Income from continuing operations before income taxes 245 (836) 830 Add back (subtract): Litigation matters 8 1 - (Gain) loss on disposal of other assets, net (9) - 14 Loss on impairment of other assets, net - 1,010 - (Gain) loss on retirement of debt - 13 (2) Other, net 5 (8) 5 ----------- ----------- -----------Adjusted income from continuing operations before income taxes 249 180 847Income tax expense from continuing operations 81 (32) 147 Add back (subtract): Changes in estimates (1) (35) (8) (17) Other, net 2 - (1) ----------- ----------- -----------Adjusted income tax expense from continuing operations (2) 48 (40) 129 ----------- ----------- -----------Effective Tax Rate (3) 33.1% 3.8% 17.7%Annual Effective Tax Rate (4) 19.3% -22.1% 15.2%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 December 31, 2010 includes ($65) 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