May 02, 2012 at 17:00 PM EDT
Transocean Ltd. Reports First Quarter 2012 Results

ZUG, SWITZERLAND -- (Marketwire) -- 05/02/12 -- Transocean Ltd. (NYSE: RIG) (SIX: RIGN)

  • First quarter 2012 revenues were $2.331 billion compared with $2.422 billion in the fourth quarter 2011,

  • First quarter 2012 net income attributable to controlling interest was $42 million, which included $184 million of net unfavorable items. This compares with the fourth quarter 2011 net loss attributable to controlling interest of $6.119 billion, which included $6.176 billion of net unfavorable items,

  • Revenue efficiency(1) was 90.4 percent in the first quarter, compared with 91.9 percent in the fourth quarter 2011,

  • Fleet utilization(2) was 61 percent in the first quarter, unchanged from the fourth quarter 2011,

  • First quarter 2012 operating and maintenance expenses were $1.410 billion. Excluding $1.0 billion for estimated loss contingencies associated with the Macondo Well incident, fourth quarter 2011 operating and maintenance expenses were $1.565 billion,

  • Cash flows from operating activities were $540 million in the first quarter, which compares with $563 million in the fourth quarter 2011,

  • First quarter 2012 Annual Effective Tax Rate(3) was 25.5 percent compared with 59.6 percent in the fourth quarter 2011, and

  • New contracts totaling $834 million were secured in the Fleet Status Report periods February 14, 2012 through April 18, 2012. Since April 18, 2012, additional contracts totaling $430 million were secured.

Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $42 million, or $0.12 per diluted share, for the three months ended March 31, 2012. First quarter 2012 results include net unfavorable items of $184 million, or $0.52 per diluted share. The results compare with net income attributable to controlling interest of $310 million, or $0.96 per diluted share, for the three months ended March 31, 2011. First quarter 2011 results included net favorable items of $139 million, or $0.43 per diluted share, primarily associated with the gain on sale of the Trident 20, partially offset by charges mainly related to unfavorable discrete tax items.

Net unfavorable items, after tax, impacting the first quarter of 2012 include the following:

  • $118 million, or $0.34 per diluted share, increase in the charge associated with the completion of the measurement of the estimated goodwill impairment recorded in the fourth quarter 2011 for the contract drilling services reporting unit,

  • $62 million, or $0.17 per diluted share, impairment of the intangible assets of ADTI, the drilling management services reporting unit,

  • $29 million, or $0.08 per diluted share, of favorable discrete tax items,

  • $17 million, or $0.05 per diluted share, impairment charge associated with the sale of GSF Rig 136,

  • $15 million, or $0.04 per diluted share, loss associated with the sale of Challenger Minerals (North Sea) Limited and the impairment of the properties of Challenger Minerals Inc., and

  • $1 million associated with the company's acquisition of Aker Drilling.

Operations Quarterly Review

Revenues for the three months ended March 31, 2012 were $2.331 billion, compared with revenues of $2.422 billion during the three months ended December 31, 2011. Contract drilling revenues decreased $35 million due mainly to lower revenue efficiency primarily on Deepwater and Midwater Floaters. Total fleet revenue efficiency was 90.4 percent for the first quarter, compared with 91.9 percent in the fourth quarter 2011. Other revenues decreased $54 million to $117 million for the first quarter 2012, compared with $171 million in the prior quarter, primarily due to decreased levels of low-margin drilling management services activity.

Operating and maintenance expenses totaled $1.410 billion for the first quarter 2012. This compares with $1.565 billion in the fourth quarter 2011, which excludes $1.0 billion for estimated loss contingencies associated with the Macondo Well incident. The sequential decline in operating and maintenance expenses relates to the timing of certain projects and various other items. These include approximately $70 million in net lower costs incurred on rigs undergoing shipyard, maintenance, repair and equipment certification projects during the period; approximately $40 million associated with reduced activity in the company's low-margin drilling management services reporting unit; and approximately $35 million related to the fourth quarter 2011 termination of the Deepwater Expedition contract.

Depreciation and amortization expense was $351 million in the first quarter 2012 compared with $374 million in the prior quarter. The $23 million decrease was due mainly to assets that are now fully depreciated and the impact of Standard Jackups classified as held for sale or sold.

General and administrative expenses were $69 million for the first quarter 2012 compared with $88 million in the previous quarter, including $1 million and $17 million, respectively, associated with the Aker Drilling acquisition.

Annual Effective Tax Rate

Transocean's Annual Effective Tax Rate (3) for the first quarter 2012, which excludes various discrete items, was 25.5 percent. This compares with 59.6 percent for the prior quarter.

Other Items

For the first quarter, interest expense, net of amounts capitalized, was $180 million, compared with $178 million in the fourth quarter 2011. Capitalized interest for the first quarter 2012 was $13 million compared with $10 million in the prior quarter. Interest income decreased to $15 million in the first quarter, compared with $17 million in the fourth quarter 2011.

Cash flows from operating activities decreased $23 million to $540 million for the first quarter 2012 compared with $563 million for the fourth quarter 2011. Capital expenditures decreased to $260 million for the first quarter compared with $350 million in the fourth quarter of 2011. The lower capital expenditures were primarily due to the timing of shipyard milestone payments associated with the company's newbuild program.

Forward-Looking Statements

Statements included in this news release, including those regarding estimates of Transocean's goodwill or long-lived asset impairments and the estimated loss contingencies associated with the Macondo Well incident, are forward-looking statements that involve certain assumptions. These statements are based on currently available competitive, financial, and economic data along with our current operating plans and involve risks and uncertainties including, but not limited to, market conditions, Transocean's results of operations and other factors detailed in "Risk Factors" and elsewhere in Transocean's filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. Transocean disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on Thursday, May 3, 2012. To participate, dial +1 800-768-6563 or +1 785-830-7991 and refer to confirmation code 9219164 approximately 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 three charts that may be discussed during the conference call, titled "1Q12 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. EDT, 7:00 p.m. CEST, on May 3, 2012, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 9219164. 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

Transocean is a leading international provider of offshore contract drilling services for oil and gas wells. We own or have partial ownership interests in and operate a fleet of 129 mobile offshore drilling units consisting of 50 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 25 Midwater Floaters, nine High-Specification Jackups, 44 Standard Jackups and one swamp barge. In addition, we have two Ultra-Deepwater drillships and four High-Specification Jackups under construction. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services. We believe we operate one of the most versatile offshore drilling fleets in the world.

(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 the company's 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 the website at www.deepwater.com.


                      TRANSOCEAN LTD. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                    (In millions, except per share data)
                                (Unaudited)


                                                     Three months ended
                                                          March 31,
                                                 --------------------------
                                                     2012          2011
                                                 ------------  ------------
Operating revenues
  Contract drilling revenues                     $      2,203  $      1,950
  Contract drilling intangible revenues                    11            10
  Other revenues                                          117           184
                                                 ------------  ------------
                                                        2,331         2,144
                                                 ------------  ------------
Costs and expenses
  Operating and maintenance                             1,410         1,359
  Depreciation and amortization                           351           354
  General and administrative                               69            67
                                                 ------------  ------------
                                                        1,830         1,780
                                                 ------------  ------------
Loss on impairment                                       (227)           --
Gain (loss) on disposal of assets, net                     (4)            8
                                                 ------------  ------------
Operating income                                          270           372
                                                 ------------  ------------

Other income (expense), net
  Interest income                                          15            15
  Interest expense, net of amounts capitalized           (180)         (145)
  Other, net                                               (7)            3
                                                 ------------  ------------
                                                         (172)         (127)
                                                 ------------  ------------
Income from continuing operations before income
 tax expense                                               98           245
Income tax expense                                         24            81
                                                 ------------  ------------
Income from continuing operations                          74           164
Income (loss) from discontinued operations, net
 of tax                                                   (15)          176
                                                 ------------  ------------

Net income                                                 59           340
Net income attributable to noncontrolling
 interest                                                  17            30
                                                 ------------  ------------
Net income attributable to controlling interest  $         42  $        310
                                                 ============  ============

Earnings per share-basic
  Earnings from continuing operations            $       0.16  $       0.42
  Earnings (loss) from discontinued operations          (0.04)         0.54
                                                 ------------  ------------
  Earnings per share                             $       0.12  $       0.96
                                                 ============  ============

Earnings per share-diluted
  Earnings from continuing operations            $       0.16  $       0.42
  Earnings (loss) from discontinued operations          (0.04)         0.54
                                                 ------------  ------------
  Earnings per share                             $       0.12  $       0.96
                                                 ============  ============

Weighted-average shares outstanding
  Basic                                                   350           319
  Diluted                                                 350           320



                      TRANSOCEAN LTD. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In millions, except share data)
                                (Unaudited)


                                                   March 31,   December 31,
                                                     2012          2011
                                                 ------------  ------------
Assets
Cash and cash equivalents                        $      3,982  $      4,017
Accounts receivable, net of allowance for
 doubtful accounts of $28 at March 31, 2012 and
 December 31, 2011                                      2,238         2,176
Materials and supplies, net of allowance for
 obsolescence of $76 and $73 at March 31, 2012
 and December 31, 2011, respectively                      663           627
Deferred income taxes, net                                142           142
Assets held for sale                                       53            26
Other current assets                                      595           621
                                                 ------------  ------------
    Total current assets                                7,673         7,609
                                                 ------------  ------------

Property and equipment                                 28,960        29,037
Property and equipment of consolidated variable
 interest entities                                      2,255         2,252
Less accumulated depreciation                           8,892         8,760
                                                 ------------  ------------
  Property and equipment, net                          22,323        22,529
                                                 ------------  ------------
Goodwill                                                3,087         3,205
Other assets                                            1,632         1,745
                                                 ------------  ------------
    Total assets                                 $     34,715  $     35,088
                                                 ============  ============

Liabilities and equity
Accounts payable                                 $        841  $        880
Accrued income taxes                                       70            89
Debt due within one year                                2,695         1,942
Debt of consolidated variable interest entities
 due within one year                                       97            97
Other current liabilities                               2,061         2,350
                                                 ------------  ------------
    Total current liabilities                           5,764         5,358
                                                 ------------  ------------

Long-term debt                                          9,940        10,756
Long-term debt of consolidated variable interest
 entities                                                 724           741
Deferred income taxes, net                                512           523
Other long-term liabilities                             1,914         1,903
                                                 ------------  ------------
    Total long-term liabilities                        13,090        13,923
                                                 ------------  ------------

Commitments and contingencies
Redeemable noncontrolling interest                        138           116

Shares, CHF 15.00 par value, 402,282,355
 authorized, 167,617,649 conditionally
 authorized, 365,135,298 issued at March 31,
 2012 and December 31, 2011; 350,500,518 and
 349,805,793 outstanding at March 31, 2012 and
 December 31, 2011, respectively                        4,991         4,982
Additional paid-in capital                              7,216         7,211
Treasury shares, at cost, 2,863,267 held at
 March 31, 2012 and December 31, 2011                    (240)         (240)
Retained earnings                                       4,286         4,244
Accumulated other comprehensive loss                     (515)         (496)
                                                 ------------  ------------
  Total controlling interest shareholders'
   equity                                              15,738        15,701
                                                 ------------  ------------
  Noncontrolling interest                                 (15)          (10)
                                                 ------------  ------------
    Total equity                                       15,723        15,691
                                                 ------------  ------------
    Total liabilities and equity                 $     34,715  $     35,088
                                                 ============  ============



                      TRANSOCEAN LTD. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                               (In millions)
                                (Unaudited)


                                                     Three months ended
                                                          March 31,
                                                 --------------------------
                                                     2012          2011
                                                 ------------  ------------
Cash flows from operating activities
  Net income                                     $         59  $        340
  Adjustments to reconcile to net cash provided
   by operating activities:
    Amortization of drilling contract
     intangibles                                          (11)          (10)
    Depreciation and amortization                         351           354
    Share-based compensation expense                       23            27
    Loss on impairment                                    227            --
    (Gain) loss on disposal of assets, net                  4            (8)
    (Gain) loss on disposal of discontinued
     operations, net                                       14          (173)
    Amortization of debt issue costs, discounts
     and premiums, net                                     18            26
    Deferred income taxes                                 (30)           11
    Other, net                                             21            (3)
    Changes in deferred revenue, net                      (12)           46
    Changes in deferred expenses, net                     (49)          (36)
    Changes in operating assets and liabilities           (75)         (184)
                                                 ------------  ------------
Net cash provided by operating activities                 540           390
                                                 ------------  ------------

Cash flows from investing activities
  Capital expenditures                                   (260)         (240)
  Proceeds from disposal of assets, net                    41            13
  Proceeds from disposal of discontinued
   operations, net                                         --           259
  Other, net                                               12            (6)
                                                 ------------  ------------
Net cash provided by (used in) investing
 activities                                              (207)           26
                                                 ------------  ------------

Cash flows from financing activities
  Changes in short-term borrowings, net                    --            51
  Proceeds from debt                                       --             5
  Repayments of debt                                     (147)          (47)
  Proceeds from restricted cash investments               108            --
  Deposits to restricted cash investments                 (42)           --
  Distribution of qualifying additional paid-in
   capital                                               (278)           --
  Other, net                                               (9)           (7)
                                                 ------------  ------------
Net cash provided by (used in) financing
 activities                                              (368)            2
                                                 ------------  ------------

Net increase (decrease) in cash and cash
 equivalents                                              (35)          418
                                                 ------------  ------------
Cash and cash equivalents at beginning of period        4,017         3,394
                                                 ------------  ------------
Cash and cash equivalents at end of period       $      3,982  $      3,812
                                                 ============  ============



                      TRANSOCEAN LTD. AND SUBSIDIARIES
                         FLEET OPERATING STATISTICS

                                        Operating Revenues (in millions) (1)
                                        ------------------------------------
                                                 Three months ended
                                        ------------------------------------
                                         March 31,  December 31,   March 31,
                                           2012         2011         2011
                                        ----------  ------------  ----------
Contract Drilling Revenues
 High-Specification Floaters:
  Ultra Deepwater Floaters              $    1,092  $      1,066  $      844
  Deepwater Floaters                           236           259         290
  Harsh Environment Floaters                   255           285         150
                                        ----------  ------------  ----------
 Total High-Specification Floaters           1,583         1,610       1,284
 Midwater Floaters                             347           333         400
 Jackups:
  High-Specification Jackups                    78            68          31
  Standard Jackups                             189           220         229
                                        ----------  ------------  ----------
 Total Jackups                                 267           288         260
 Other Rigs                                      6             7           6
                                        ----------  ------------  ----------
Total Contract Drilling Revenues             2,203         2,238       1,950
                                        ----------  ------------  ----------
Contract Intangible Revenue                     11            13          10
Other Revenues
 Client Reimbursable Revenues                   48            41          37
 Integrated Services and Other                   -            13          15
 Drilling Management Services                   69           117         132
                                        ----------  ------------  ----------
Total Other Revenues                           117           171         184
                                        ----------  ------------  ----------
Total Company                           $    2,331  $      2,422  $    2,144
                                        ==========  ============  ==========

                                              Average Daily Revenue (1)
                                        ------------------------------------
                                                 Three months ended
                                        ------------------------------------
                                         March 31,  December 31,   March 31,
                                           2012         2011         2011
                                        ----------  ------------  ----------
 High-Specification Floaters:
  Ultra Deepwater Floaters              $  534,900  $    542,900  $  467,700
  Deepwater Floaters                       348,900       351,600     395,900
  Harsh Environment Floaters               478,600       468,300     402,400
 Total High-Specification Floaters         486,900       486,600     441,300
 Midwater Floaters                         275,600       274,300     313,000
 High-Specification Jackups                116,900       111,900     106,200
 Standard Jackups                           91,200        93,400     109,200
 Other Rigs                                 73,300        73,800      73,400
                                        ----------  ------------  ----------
Total Drilling Fleet                    $  300,300  $    295,400  $  292,600
                                        ==========  ============  ==========

(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)
                                          ----------------------------------
                                                  Three months ended
                                          ----------------------------------
                                          March 31,  December 31,  March 31,
                                             2012        2011         2011
                                          ---------  ------------  ---------
  High-Specification Floaters:
    Ultra Deepwater Floaters                 83%          79%         77%
    Deepwater Floaters                       47%          50%         51%
    Harsh Environment Floaters               84%          95%         83%
  Total High-Specification Floaters          71%          72%         69%
  Midwater Floaters                          56%          55%         60%
  High-Specification Jackups                 81%          74%         40%
  Standard Jackups                           47%          51%         43%
  Other Rigs                                 98%          99%         49%
                                          ---------  ------------  ---------
Total Drilling Fleet                         61%          61%         55%
                                          =========  ============  =========

(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
                     -------------------------------------------------------

                     1Q 2012 4Q 2011 3Q 2011 2Q 2011 1Q 2011 FY 2011 FY 2010
                     ------- ------- ------- ------- ------- ------- -------

Ultra Deepwater       89.4%   89.5%   86.4%   89.3%   85.3%   87.7%   88.6%
Deepwater             81.1%   88.1%   87.7%   93.9%   88.2%   89.4%   90.3%
Harsh Environment
 Floaters             97.8%   98.0%   94.4%   98.4%   99.2%   97.4%   96.0%
Midwater Floaters     90.8%   94.2%   90.8%   91.9%   93.6%   92.6%   92.5%
High Specification
 Jackups              93.4%   94.3%   97.3%   95.6%   95.1%   95.6%   95.3%
Standard Jackups      97.8%   96.4%   98.2%   98.4%   97.7%   97.7%   97.3%
Others                97.3%   98.6%   99.5%   97.6%   99.0%   98.7%   98.4%

                     ------- ------- ------- ------- ------- ------- -------
Total Fleet           90.4%   91.9%   89.5%   92.1%   90.0%   90.9%   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
                                       ------------------------------------
                                        March 31,  December 31,   March 31,
                                          2012         2011         2011
                                       ----------  ------------  ----------

Income (loss) from continuing
 operations before income taxes        $       98  $     (5,970) $      245
  Add back (subtract):
  Litigation matters                           --         1,000           8
  Acquisition costs                             1            17          --
  Gain on disposal of other assets,
   net                                         --           (11)         (9)
  Loss on impairment of goodwill and
   other assets                               227         5,201          --
  Loss on marketable security                  --            13          --
  Other, net                                   --            --           5
                                       ----------  ------------  ----------
Adjusted income from continuing
 operations before income taxes               326           250         249
                                       ----------  ------------  ----------

Income tax expense from continuing
 operations                                    24           132          81
  Add back (subtract):
  Loss on impairment                           30            --          --
  Changes in estimates (1)                     29            18         (35)
  Other, net                                   --            --           2
                                       ----------  ------------  ----------
Adjusted income tax expense from
 continuing operations (2)             $       83  $        150  $       48
                                       ----------  ------------  ----------

Effective Tax Rate (3)                       24.7%         -2.2%       33.1%

Annual Effective Tax Rate (4)                25.5%         59.6%       19.3%

(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, 2011 include $46 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.

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