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Press release from Marketwire

Transocean Ltd. Reports Third Quarter 2011 Results

Wednesday, November 02, 2011

Transocean Ltd. Reports Third Quarter 2011 Results16:23 EDT Wednesday, November 02, 2011ZUG, SWITZERLAND--(Marketwire - November 02, 2011) - Transocean Ltd. (NYSE: RIG) (SIX: RIGN)- Revenues decreased four percent to $2.242 billion compared to $2.334 billion in the second quarter 2011- Third quarter 2011 net loss attributable to controlling interest was $71 million, which included $81 million of certain net unfavorable items, compared to net income attributable to controlling interest of $155 million in the second quarter 2011, which included $36 million of certain net unfavorable items- Revenue efficiency(1) was 89.5 percent, down from 92.1 percent in the second quarter 2011- Fleet utilization(2) was 58 percent, up from 55 percent in the second quarter 2011- Operating and maintenance expenses were $1.540 billion, up from $1.492 billion in the second quarter 2011- Cash flows from operating activities were $492 million, up from $340 million in the second quarter 2011- The Annual Effective Tax Rate(3) for 2011 has increased to 34.1 percent from 22.6 percent in the second quarter 2011- New contracts totaling $1.4 billion were secured in the Fleet Status Report period July 13, 2011 through October 17, 2011- New contracts totaling $325 million have been secured since the October 17, 2011 Fleet Status Report- The acquisition of Aker Drilling was completed on October 4, 2011, further strengthening Transocean's industry leadership position as well as adding approximately $900 million in backlog</ul>Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported a net loss attributable to controlling interest of $71 million, or $0.22 per diluted share, for the three months ended September 30, 2011. The results compare to net income attributable to controlling interest of $368 million, or $1.15 per diluted share, for the three months ended September 30, 2010.Third quarter 2011 results included the following items, after tax, that resulted in a net unfavorable impact of approximately $81 million, or $0.25 per diluted share:- $78 million loss resulting from a forward foreign exchange contract executed to address the potential exchange rate variability associated with the company's acquisition of Aker Drilling,- $11 million related to impairment charges, discontinued operations, and discrete tax items,- $5 million of Aker Drilling acquisition costs, and- $13 million gain related to the sale of our equity interest in Overseas Drilling Limited, which owns the research vessel Joides Resolution.</ul>Third quarter 2011 results also included expenses associated with the Macondo well incident of approximately $9 million, $6 million after tax, or $0.02 per diluted share. These expenses were primarily related to legal costs and other professional fees that are not expected to be recoverable from insurance.Operations Quarterly Review</b>Revenues for the three months ended September 30, 2011 were $2.242 billion, compared to revenues of $2.334 billion during the three months ended June 30, 2011. Third quarter contract drilling revenues were $2.061 billion compared to $2.086 billion in the second quarter. The company reported revenue efficiency of 89.5 percent compared to 92.1 percent in the second quarter. Consistent with recent trends, revenue efficiency and out-of-service time continue to be adversely impacted by the need to comply with new well control equipment recertification requirements, higher standards for equipment condition and capacity constraints affecting our vendors. Other revenues decreased $69 million to $169 million, primarily due to lower drilling management services activity. Operating and maintenance expenses totaled $1.540 billion for the third quarter 2011, up from $1.492 billion for the prior quarter. The increase was primarily due to higher costs and expenses associated with rigs undergoing shipyard, maintenance, repair and equipment certification projects.Cash Flow and Capital Expenditures</b>Cash flows from operating activities increased to $492 million for the third quarter 2011 compared to $340 million for the second quarter 2011. The increase in cash flows from operations resulted primarily from a reduction in working capital during the third quarter. Capital expenditures decreased to $137 million for the third quarter compared to $293 million in the second quarter 2011. The lower expenditures were primarily due to the timing of shipyard milestone payments associated with our newbuild construction program.Effective Tax Rate</b>Transocean's third quarter Effective Tax Rate(4) was 212.8 percent compared to 33.5 percent in the second quarter. The company's third quarter Annual Effective Tax Rate(3) for 2011, which excludes various discrete items, was 82.6 percent compared to 25.6 percent in the second quarter. The increase in the Annual Effective Tax Rate was primarily due to reduced profitability in certain jurisdictions where activities are either taxed on a deemed profit basis or subject to lower tax rates. The third quarter amounts were also impacted by the catch-up adjustment required to reflect the change in the forecasted Annual Effective Tax Rate for the first and second quarter activities. The increase in the Effective Tax Rate was primarily due to the items noted above as well as the impact of the $78 million loss on the forward foreign exchange contact, which provides no tax benefit. Please see the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."Conference Call Information</b>Transocean will conduct a teleconference call at 10:00 a.m. ET, 3:00 p.m. CET, on November 3, 2011. To participate, dial +1 719-325-2223 and refer to confirmation code 8774614 approximately five to 10 minutes prior to the scheduled start time of the call.In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto Transocean's website at www.deepwater.com and selecting "Investor Relations." A file containing four charts to be discussed during the conference call, titled "3Q11 Charts," has been posted to Transocean's website and can also be found by selecting "Investor Relations/Quarterly Toolkit." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, "RIG."A telephonic replay of the conference call should be available after 1:00 p.m. ET, 6:00 p.m. CET, on November 3, 2011, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 8774614. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced internet addresses. Both replay options will be available for approximately 30 days.About Transocean</b>Transocean is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 135 mobile offshore drilling units, excluding two Ultra-Deepwater Drillships and four High-Specification Jackups under construction, Transocean's fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. Transocean owns or operates a contract drilling fleet of 50 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 25 Midwater Floaters, nine High-Specification Jackups, 50 Standard Jackups and one swamp barge.(1) Revenue efficiency is defined as actual revenue divided by the highest amount of total revenue which could have been earned during the relevant period(s). See the accompanying schedule entitled "Revenue Efficiency."(2) 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. See the accompanying schedule entitled "Utilization."(3) Annual Effective Tax Rate is defined as income tax expense from continuing operations excluding various discrete items (such as changes in estimates and tax on items excluded from income before income tax expense) divided by income from continuing operations before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."(4) Effective Tax Rate is defined as income tax expense from continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."For more information about Transocean, please visit our website at www.deepwater.com. TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three months ended Nine months endedSeptember 30, September 30, ---------------------- ---------------------- 2011 2010 2011 2010 ---------- ---------- ---------- ---------- (As (As adjusted) adjusted)Operating revenues Contract drilling revenues $ 2,061 $ 2,183 $ 6,097 $ 6,880 Contract drilling intangible revenues 12 23 32 85 Other revenues 169 75 591 374 ---------- ---------- ---------- ---------- 2,242 2,281 6,720 7,339 ---------- ---------- ---------- ----------Costs and expenses Operating and maintenance 1,540 1,202 4,391 3,735 Depreciation and amortization 362 388 1,075 1,155 General and administrative 67 59 200 180 ---------- ---------- ---------- ---------- 1,969 1,649 5,666 5,070 ---------- ---------- ---------- ----------Loss on impairment (3) -- (28) --Gain (loss) on disposal of assets, net (2) 2 5 256 ---------- ---------- ---------- ----------Operating income 268 634 1,031 2,525 ---------- ---------- ---------- ----------Other income (expense), net Interest income 7 7 27 17 Interest expense, net of amounts capitalized (151) (142) (443) (415) Other, net (77) (13) (79) (1) ---------- ---------- ---------- ---------- (221) (148) (495) (399) ---------- ---------- ---------- ----------Income from continuing operations before income tax expense 47 486 536 2,126Income tax expense 100 123 263 368 ---------- ---------- ---------- ----------Income (loss) from continuing operations (53) 363 273 1,758Income (loss) from discontinued operations, net of tax (7) 15 171 25 ---------- ---------- ---------- ----------Net income (loss) (60) 378 444 1,783Net income attributable to noncontrolling interest 11 10 50 23 ---------- ---------- ---------- ----------Net income (loss) attributable to controlling interest $ (71) $ 368 $ 394 $ 1,760 ========== ========== ========== ==========Earnings (loss) per share- basic Earnings (loss) from continuing operations $ (0.20) $ 1.10 $ 0.69 $ 5.39 Earnings (loss) from discontinued operations (0.02) 0.05 0.53 0.08 ---------- ---------- ---------- ---------- Earnings (loss) per share $ (0.22) $ 1.15 $ 1.22 $ 5.47 ========== ========== ========== ==========Earnings (loss) per share- diluted Earnings (loss) from continuing operations $ (0.20) $ 1.10 $ 0.69 $ 5.39 Earnings (loss) from discontinued operations (0.02) 0.05 0.53 0.08 ---------- ---------- ---------- ---------- Earnings (loss) per share $ (0.22) $ 1.15 $ 1.22 $ 5.47 ========== ========== ========== ==========Weighted-average shares outstanding Basic 320 319 320 320 Diluted 320 319 320 320 TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data) (Unaudited) September 30, December 31, 2011 2010 ------------- ------------- (As adjusted)AssetsCash and cash equivalents $ 3,286 $ 3,394Accounts receivable, net of allowance for doubtful accounts of $28 and $38 at September 30, 2011 and December 31, 2010, respectively 2,046 1,843Materials and supplies, net of allowance for obsolescence of $76 and $70 at September 30, 2011 and December 31, 2010, respectively 578 514Deferred income taxes, net 120 115Assets held for sale 118 --Other current assets 421 329 ------------- ------------- Total current assets 6,569 6,195 ------------- -------------Property and equipment 26,886 26,721Property and equipment of consolidated variable interest entities 2,248 2,214Less accumulated depreciation 8,413 7,616 ------------- ------------- Property and equipment, net 20,721 21,319 ------------- -------------Goodwill 8,132 8,132Other assets 1,223 1,165 ------------- ------------- Total assets $ 36,645 $ 36,811 ============= =============Liabilities and equityAccounts payable $ 755 $ 832Accrued income taxes 23 109Debt due within one year 1,830 1,917Debt of consolidated variable interest entities due within one year 96 95Other current liabilities 1,566 883 ------------- ------------- Total current liabilities 4,270 3,836------------- -------------Long-term debt 8,402 8,354Long-term debt of consolidated variable interest entities 772 855Deferred income taxes, net 588 575Other long-term liabilities 1,730 1,791 ------------- ------------- Total long-term liabilities 11,492 11,575 ------------- -------------Commitments and contingenciesRedeemable noncontrolling interest 71 25Shares, CHF 15.00 par value, 335,235,298 authorized, 167,617,649 conditionally authorized, 335,235,298 issued at September 30, 2011 and December 31, 2010; 319,853,371 and 319,080,678 outstanding at September 30, 2011 and December 31, 2010, respectively 4,493 4,482Additional paid-in capital 6,545 7,504Treasury shares, at cost, 2,863,267 held at September 30, 2011 and December 31, 2010 (240) (240)Retained earnings 10,363 9,969Accumulated other comprehensive loss (338) (332) ------------- ------------- Total controlling interest shareholders' equity 20,823 21,383 ------------- ------------- Noncontrolling interest (11) (8) ------------- ------------- Total equity 20,812 21,375 ------------- ------------- Total liabilities and equity $ 36,645 $ 36,811 ============= ============= TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three months ended Nine months ended September 30, September 30, -------------------- -------------------- 2011 2010 2011 2010 --------- --------- --------- ---------Cash flows from operating activitiesNet income (loss) $ (60) $ 378 $ 444 $ 1,783Adjustments to reconcile to net cash provided by operating activities Amortization of drilling contract intangibles (12) (23) (32) (85) Depreciation and amortization 362 388 1,075 1,155 Share-based compensation expense 20 26 74 79 Loss on impairment 3 -- 28 -- (Gain) loss on disposal of discontinued operations, net 4 -- (169) -- (Gain) loss on disposal of assets, net 2 (2) (5) (256) Amortization of debt issue costs, discounts and premiums, net 33 48 95 148 Deferred income taxes (14) (40) 2 (74) Other, net 82 30 93 62 Changes in deferred revenue, net (36) 47 7 205 Changes in deferred expenses, net 18 (18) (66) (55) Changes in operating assets and liabilities 90 (125) (324) 188 --------- --------- --------- ---------Net cash provided by operating activities 492 709 1,222 3,150 --------- --------- --------- ---------Cash flows from investing activities Capital expenditures (137) (300) (670) (969) Investment in marketable security (199) -- (199) -- Proceeds from disposal of assets, net 88 -- 106 51 Proceeds from disposal of discontinued operations, net -- -- 259 -- Proceeds from insurance recoveries for loss of drilling unit -- -- -- 560 Payment for settlement of forward exchange contract, net (78) -- (78) -- Other, net 6 2 (27) 17 --------- --------- --------- ---------Net cash used in investing activities (320) (298) (609) (341) --------- --------- --------- ---------Cash flows from financing activities Change in short-term borrowings, net 2 46 58 (131) Proceeds from debt -- 2,000 5 2,054 Repayments of debt (23) (691) (272) (966) Distribution of qualifying additional paid-in capital (254) -- (508) -- Purchases of shares held in treasury -- -- -- (240) Other, net -- (18) (4) (20) --------- --------- --------- ---------Net cash provided by (used in) financing activities (275) 1,337 (721) 697 --------- --------- --------- ---------Net increase (decrease) in cash and cash equivalents (103) 1,748 (108) 3,506Cash and cash equivalents at beginning of period 3,389 2,888 3,394 1,130 --------- --------- --------- ---------Cash and cash equivalents at end of period $ 3,286 $ 4,636 $ 3,286 $ 4,636 ========= ========= ========= ========= TRANSOCEAN LTD. AND SUBSIDIARIES FLEET OPERATING STATISTICSOperating Revenues (in millions) (1) ------------------------------------------------- Nine months ended Three months ended September 30, ----------------------------- ------------------- September June 30, September 30, 2011 2011 30, 2010 2011 2010 --------- --------- --------- --------- ---------Contract Drilling Revenues High-Specification Floaters: Ultra Deepwater Floaters $ 1,030 $ 1,005 $ 720 $ 2,878 $ 2,430 Deepwater Floaters 187 238 350 716 1,122 Harsh Environment Floaters 190 181 178 522 520 --------- --------- --------- --------- --------- Total High-Specification Floaters 1,407 1,424 1,248 4,116 4,072 Midwater Floaters 352 376 572 1,129 1,616 Jackups: High-Specification Jackups 69 48 57 148 209 Standard Jackups 226 230 298 685 963 --------- --------- --------- --------- --------- Total Jackups 295 278 355 833 1,172 Other Rigs 7 8 8 20 20 --------- --------- --------- --------- ---------Total Contract Drilling Revenues 2,061 2,086 2,183 6,098 6,880 --------- --------- --------- --------- ---------Contract Intangible Revenue 12 10 23 32 85Other Revenues Client Reimbursable Revenues 43 40 40 121 118 Integrated Services and Other 14 15 11 42 52 Drilling Management Services 112 183 25 427 204 --------- --------- --------- --------- ---------Total Other Revenues 169 238 76 590 374 --------- --------- --------- --------- ---------Total Company $ 2,242 $ 2,334 $ 2,282 $ 6,720 $ 7,339 ========= ========= ========= ========= ========= Average Daily Revenue (1) ------------------------------------------------- Nine months ended Three months ended September 30, ----------------------------- ------------------- September June 30, September 30, 2011 2011 30, 2010 2011 2010 --------- --------- --------- --------- --------- High-Specification Floaters: Ultra Deepwater Floaters $ 524,800 $ 516,600 $ 422,800 $ 504,000 $ 464,200 Deepwater Floaters 348,400 396,400 365,600 382,400 381,800 Harsh Environment Floaters 433,800 430,100 414,100 423,100 413,600 Total High-Specification Floaters 478,900 479,900 403,900 466,800 431,800 Midwater Floaters 287,400 333,000 328,400 310,600 326,300 High-Specification Jackups 115,600 110,300 120,800 111,800 140,500 Standard Jackups 100,400 111,700 113,200 106,900 121,100 Other Rigs 73,800 76,400 72,900 74,500 72,600 --------- --------- --------- --------- ---------Total Drilling Fleet $ 290,200 $ 312,100 $ 271,700 $ 298,100 $ 285,500 ========= ========= ========= ========= =========(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. TRANSOCEAN LTD. AND SUBSIDIARIES FLEET OPERATING STATISTICS (continued) Utilization (2) ------------------------------------------------- Nine months ended Three months ended September 30, ----------------------------- ------------------- September June 30, September 30, 2011 2011 30, 2010 2011 2010 --------- --------- --------- --------- --------- High-Specification Floaters: Ultra Deepwater Floaters 79% 80% 77% 79% 80% Deepwater Floaters 37% 41% 65% 43% 67% Harsh Environment Floaters 95% 93% 93% 90% 92% Total High-Specification Floaters 67% 69% 75% 68% 77% Midwater Floaters 55% 54% 73% 56% 70% High-Specification Jackups 69% 56% 57% 56% 61% Standard Jackups 48% 43% 52% 45% 53% Other Rigs 100% 50% 50% 60% 50% --------- --------- --------- --------- ---------Total Drilling Fleet 58% 55% 64% 56% 64%(2) 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. Revenue Efficiency (3) Trailing Five Quarters and Historical Data ----------------------------------------------------------- 3Q 2011 2Q 2011 1Q 2011 4Q 2010 3Q 2010 FY 2010 --------- --------- --------- --------- --------- --------- (As (As (As adjusted) adjusted) adjusted)Ultra Deepwater 86.4% 89.3% 85.3% 86.1% 86.5% 88.6%Deepwater 87.7% 93.9% 88.2% 88.6% 90.1% 90.3%Harsh Environment Floaters 94.4% 98.4% 99.2% 96.1% 96.4% 96.0%Midwater Floaters 90.8% 91.9% 93.6% 85.0% 96.2% 92.5%High- SpecificationJackups 97.3% 95.6% 95.1% 97.7% 93.3% 95.3%Standard Jackups 98.2% 98.4% 97.7% 98.9% 96.4% 97.3%Others 99.5% 97.6% 99.0% 96.1% 99.6% 98.4% --------- --------- --------- --------- --------- ---------Total Fleet 89.5% 92.1% 90.0% 88.7% 91.8% 91.7% ========= ========= ========= ========= ========= =========(3) Revenue efficiency is defined as actual revenue divided by the highest amount of total revenue which could have been earned during the relevant period(s). TRANSOCEAN LTD. AND SUBSIDIARIES SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS (In US$ millions, except percentages) Three months ended Nine months ended ------------------------------- -------------------- September June 30, September September September 30, 2011 2011 30, 2010 30, 2011 30, 2010 --------- --------- --------- --------- --------- (As (As adjusted) adjusted)Income from continuing operations before income taxes $ 47 $ 244 $ 486 $ 536 $ 2,126 Add back (subtract): Litigation matters -- -- 14 8 26 Acquisition costs 5 -- -- 5 -- Loss on impairment of assets 3 25 -- 28 -- (Gain) loss on disposal of other assets, net -- -- 1 (9) 14 Loss on forward exchange contract 78 -- -- 78 -- Gain on loss of Deepwater Horizon -- -- -- -- (267) Gain on sale of interest in Overseas Drilling Limited (13) -- -- (13) -- Gain on retirement of debt -- -- 21 -- 20 Other, net 1 -- -- 6 5 --------- --------- --------- --------- ---------Adjusted income from continuing operations before income taxes 121 269 522 639 1,924 --------- --------- --------- --------- ---------Income tax expense from continuing operations 100 82 123 263 368 Add back (subtract): Changes in estimates (1) -- (13) (12) (48) (29) Other, net -- -- (2) 2 (1) --------- --------- --------- --------- ---------Adjusted income tax expense from continuing operations (2) $ 100 $ 69 $ 109 $ 217 $ 338 --------- --------- --------- --------- ---------Effective Tax Rate (3) 212.8% 33.5% 25.3% 49.1% 17.3%Annual Effective Tax Rate (4) 82.6% 25.6% 21.0% 34.1% 17.6%(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 and nine months ended September 30, 2011 include $60 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: Thad VaydaAnalyst Contacts:+1 713-232-7551OR+1 713-232-7420Chris KettmannORGuy A. CantwellMedia Contact:+1 713-232-7647