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| Transocean Inc. Reports Third Quarter 2007 Financial Results |
HOUSTON--(BUSINESS WIRE)--Oct. 31, 2007--Transocean Inc. (NYSE:RIG) today reported net income for the three months ended September 30, 2007 of $973 million, or $3.24 per diluted share, on record quarterly revenues of $1,538 million. The results compare to net income of $309 million, or $0.96 per diluted share, on revenues of $1,025 million, for the three months ended September 30, 2006. Third quarter 2007 results included after-tax income of $336 million, or $1.12 per diluted share, related to $276 million for the TODCO tax sharing agreement, $52 million for changes in estimated taxes, primarily foreign tax credits, and an $8 million gain resulting from the sale of the drilling barge Searex VI. For the quarter ended September 30, 2006, net income included $37 million, or $0.12 per diluted share, primarily from the sale of two tender-assist rigs. For the nine months ended September 30, 2007, net income totaled $2,075 million, or $6.91 per diluted share, on revenues of $4,300 million. For the same period last year, net income totaled $764 million, or $2.31 per diluted share, on revenues of $2,696 million. Results for the first nine months of 2007 include $369 million, or $1.22 per diluted share, including $33 million recognized during the first half of 2007 from rig sales and discrete tax items plus the $336 million recognized during the third quarter as noted above. For the nine months ended September 30, 2006, net income included $191 million, or $0.57 per diluted share, primarily from the sale of six rigs. Operations Quarterly Review Revenues for the three months ended September 30, 2007 increased 7.3 percent to $1,538 million compared to revenues of $1,434 million during the three months ended June 30, 2007. The quarter-to-quarter increase in revenues was primarily due to a higher average dayrate, partially offset by a slight reduction in days in service. The third quarter 2007 average dayrate reached a record high of $219,700, up 8.5 percent, compared to $202,400 during the second quarter 2007. The increase in average dayrate was experienced across all rig categories, primarily as a result of rigs commencing new contracts at the higher prevailing current dayrates. For the three months ended September 30, 2007, operating income before general and administrative expenses totaled $780 million, a 10.6 percent increase from $705 million reported for the second quarter 2007. The $75 million increase in operating income before general and administrative expense was due to higher revenues, driven by increased dayrates. Partially offsetting the higher third quarter 2007 revenues was $36 million in increased operating and maintenance expenses, primarily due to an increase in reimbursable costs and integrated service expenditures, as well as an increase in the number of maintenance projects. Field operating income(1) (defined as revenues less operating and maintenance expenses) increased 8.4 percent to $875 million for the third quarter 2007, compared to $807 million for the prior three-month period. The increase in third quarter 2007 field operating income was due chiefly to strong revenue growth combined with stable operating margins. Liquidity Cash flow from operations totaled $897 million for the third quarter 2007 compared to $289 million for the third quarter 2006. For the nine months ended September 30, 2007, cash flow from operations increased to $2,158 million compared to $733 million for the same period last year. As of September 30, 2007, total debt was $2,593 million, down $471 million compared to $3,064 as of June 30, 2007. The $471 million of debt reduction during the third quarter 2007 reflects the repayment of the company's two-year term credit facility due August 2008. Effective Tax Rate The company's Annual Effective Tax Rate(2) for the three months ended September 30, 2007 was 14.0 percent, excluding various discrete items. The Effective Tax Rate(3) of 5.1 percent for the third quarter 2007 reflects a $52 million favorable impact resulting primarily from changes in estimated foreign tax credit. The company currently expects the Annual Effective Tax Rate for the remainder of 2007 to be 14.6 percent. Conference Call Information Transocean will conduct a teleconference call at 10:00 a.m. Eastern Time on October 31, 2007. To participate, dial 913-981-5542 and refer to confirmation code 1852427 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 the company's website at www.deepwater.com and selecting "Investor Relations/News & Events/Webcasts & Presentations." A file containing four charts to be discussed during the conference call, titled "3Q07 Charts," has been posted to the company's website and can also be found by selecting "Investor Relations/News & Events/Webcasts & Presentations." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company's New York Stock Exchange trading symbol, "RIG." A telephonic replay of the conference call should be available after 1:00 p.m. Eastern Time on October 31, 2007 and can be accessed by dialing 719-457-0820 and referring to the passcode 1852427. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Forward-Looking Disclaimer Statements regarding our Annual Effective Tax Rate, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to operating hazards and delays, risks associated with international operations, future financial results, actions by customers and other third parties, factors affecting the supply and demand of drilling rigs, including newbuilds, reactivations and the reallocation of current rigs, factors affecting the duration of contracts including well-in-progress provisions, the actual amount of downtime, factors resulting in reduced applicable dayrates, hurricanes and other weather conditions, the future price of oil and gas and other factors detailed in the company's most recent Form 10-K and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Transocean Inc. is the world's largest offshore drilling contractor with a fleet of 82 mobile offshore drilling units. The company's mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, 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. The company's fleet consists of 34 High-Specification Floaters (semisubmersibles and drillships), 19 Other Floaters, 25 Jackups and other assets utilized in the support of offshore drilling activities worldwide. With a current equity market capitalization of $33.4 billion, Transocean Inc.'s ordinary shares are traded on the New York Stock Exchange under the symbol "RIG." (1) For a reconciliation of operating income before general and administrative expense to field operating income, see the accompanying schedule entitled "Non-GAAP Financial Measures and Reconciliations - Operating Income Before General and Administrative Expense to Field Operating Income." (2) Annual Effective Tax Rate is defined as income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18. See the accompanying schedule entitled "Effective Tax Rate Analysis." (3) Effective Tax Rate is defined as income tax expense divided by income before income taxes. See the accompanying schedule entitled "Effective Tax Rate Analysis."
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
--------- -------- --------- --------
Operating revenues
Contract drilling revenues $ 1,455 $ 991 $ 4,088 $ 2,598
Other revenues 83 34 212 98
----------------------------------------------------------------------
1,538 1,025 4,300 2,696
----------------------------------------------------------------------
Costs and expenses
Operating and maintenance 663 561 1,858 1,585
Depreciation 103 99 304 303
General and administrative 27 22 82 67
----------------------------------------------------------------------
793 682 2,244 1,955
----------------------------------------------------------------------
Gain from disposal of assets,
net 8 47 30 222
----------------------------------------------------------------------
Operating income 753 390 2,086 963
----------------------------------------------------------------------
Other income (expense), net
Interest income 7 4 17 14
Interest expense, net of
amounts capitalized (23) (28) (93) (72)
Other, net 287 7 295 9
----------------------------------------------------------------------
271 (17) 219 (49)
----------------------------------------------------------------------
Income before income taxes and
minority interest 1,024 373 2,305 914
Income tax expense 52 64 230 150
Minority interest (1) - - -
----------------------------------------------------------------------
Net income $ 973 $ 309 $ 2,075 $ 764
======================================================================
Earnings per share
Basic $ 3.36 $ 0.99 $ 7.17 $ 2.39
Diluted $ 3.24 $ 0.96 $ 6.91 $ 2.31
======================================================================
Weighted average shares
outstanding
Basic 290 312 289 320
Diluted 300 323 301 332
======================================================================
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
September 30, December 31,
2007 2006
------------- -------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 618 $ 467
Accounts receivable, net of allowance for
doubtful accounts of $41 and $26 at
September 30, 2007 and December 31, 2006,
respectively 1,266 946
Materials and supplies, net of allowance
for obsolescence of $21 and $19 at
September 30, 2007 and December 31, 2006,
respectively 179 160
Deferred income taxes, net 28 16
Other current assets 132 67
----------------------------------------------------------------------
Total current assets 2,223 1,656
----------------------------------------------------------------------
Property and equipment 11,460 10,539
Less accumulated depreciation 3,489 3,213
----------------------------------------------------------------------
Property and equipment, net 7,971 7,326
----------------------------------------------------------------------
Goodwill 2,187 2,195
Other assets 319 299
----------------------------------------------------------------------
Total assets $ 12,700 $ 11,476
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 406 $ 477
Accrued income taxes 156 98
Debt due within one year 1,018 95
Other current liabilities 419 369
----------------------------------------------------------------------
Total current liabilities 1,999 1,039
----------------------------------------------------------------------
Long-term debt 1,575 3,200
Deferred income taxes, net 57 54
Other long-term liabilities 566 343
----------------------------------------------------------------------
Total long-term liabilities 2,198 3,597
----------------------------------------------------------------------
Commitments and contingencies
Minority interest 1 4
Preference shares, $0.10 par value;
50,000,000 shares authorized, none issued
and outstanding - -
Ordinary shares, $0.01 par value;
800,000,000 shares authorized,
290,802,699 and 292,454,457 shares issued
and outstanding at September 30, 2007 and
December 31, 2006, respectively 3 3
Additional paid-in capital 7,780 8,044
Accumulated other comprehensive loss (31) (30)
Retained earnings (accumulated deficit) 750 (1,181)
----------------------------------------------------------------------
Total shareholders' equity 8,502 6,836
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 12,700 $ 11,476
======================================================================
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- ------------------
2007 2006 2007 2006
--------- --------- -------- ---------
Cash flows from operating
activities
Net income $ 973 $ 309 $ 2,075 $ 764
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation 103 99 304 303
Share-based compensation
expense 11 5 30 13
Gain from disposal of
assets, net (8) (47) (30) (222)
Deferred income taxes 9 (7) 2 18
Deferred expenses, net (4) (40) (17) (95)
Deferred revenues, net (20) 12 18 32
Other long-term
liabilities 19 (4) 31 17
Other, net (7) (7) (3) (14)
Changes in operating assets
and liabilities
Accounts receivable (82) (169) (320) (273)
Other current assets 3 15 (29) (36)
Accounts payable and other
current liabilities (75) 76 65 167
Income taxes
receivable/payable, net (25) 47 32 59
----------------------------------------------------------------------
Net cash provided by operating
activities 897 289 2,158 733
----------------------------------------------------------------------
Cash flows from investing
activities
Capital expenditures (305) (434) (1,060) (710)
Proceeds from disposal of
assets, net 21 95 62 298
Joint ventures and other
investments, net - - (3) -
----------------------------------------------------------------------
Net cash used in investing
activities (284) (339) (1,001) (412)
----------------------------------------------------------------------
Cash flows from financing
activities
Borrowings under the
Revolving Credit Facility,
net - 900 - 900
Proceeds from issuance of
debt, net - 1,000 - 1,000
Repayment of borrowings under
Term Credit Facility (470) - (700) -
Release of escrow funds -
Nautilus lease financing - 30 - 30
Repurchase of ordinary shares - (1,751) (400) (2,351)
Proceeds from issuance of
ordinary shares under share-
based compensation plans,
net 1 1 56 67
Tax benefit from issuance of
ordinary shares under share-
based compensation plans 23 - 33 -
Other, net 6 (5) 5 (5)
----------------------------------------------------------------------
Net cash provided by (used in)
financing activities (440) 175 (1,006) (359)
----------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 173 125 151 (38)
----------------------------------------------------------------------
Cash and cash equivalents at
beginning of period 445 282 467 445
----------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 618 $ 407 $ 618 $ 407
======================================================================
Transocean Inc.
Fleet Operating Statistics
Operating Revenues (in millions) (1)
---------------------------------------------------
Nine months ended
Three months ended Sept 30,
------------------------------- -------------------
September September
30, June 30, 30,
2007 2007 2006 2007 2006
--------- --------- ----------- --------- ---------
Contract Drilling
Revenues
High-
Specification
Floaters:
Ultra
Deepwater
Floaters $ 381 $ 336 $ 257 $ 1,057 $ 711
Other
Deepwater
Floaters 298 272 246 830 611
Other High-
Specification
Floaters 101 103 62 290 176
Total High-
Specification
Floaters 780 711 565 2,177 1,498
Other Floaters 412 403 218 1,193 551
Jackups 248 230 184 673 483
Other Rigs 15 16 24 45 66
Subtotal 1,455 1,360 991 4,088 2,598
Other Revenues
Client
Reimbursable
Revenues 32 29 30 92 77
Integrated
Services and
Other 51 45 4 120 21
Subtotal 83 74 34 212 98
Total Company $ 1,538 $ 1,434 $ 1,025 $ 4,300 $ 2,696
Average Dayrates (1)
---------------------------------------------------
Nine months ended
Three months ended Sept 30,
------------------------------- -------------------
September September
30, June 30, 30,
2007 2007 2006 2007 2006
--------- --------- ----------- --------- ---------
High-
Specification
Floaters:
Ultra
Deepwater
Floaters $323,200 $288,900 $ 246,000 $304,600 $223,700
Other
Deepwater
Floaters $257,700 $228,400 $ 222,300 $240,600 $188,700
Other High-
Specification
Floaters $316,400 $286,900 $ 181,500 $279,500 $172,000
Total High-
Specification
Floaters $293,900 $262,100 $ 226,700 $273,600 $201,400
Other Floaters $251,400 $226,300 $ 136,800 $233,500 $122,000
Jackups $120,500 $117,900 $ 83,400 $114,600 $ 75,800
Other Rigs $ 54,900 $ 57,200 $ 52,400 $ 54,100 $ 49,100
Total Drilling
Fleet $219,700 $202,400 $ 146,900 $206,800 $132,000
Utilization (1)
---------------------------------------------------
Nine months ended
Three months ended Sept 30,
------------------------------- -------------------
September September
30, June 30, 30,
2007 2007 2006 2007 2006
--------- --------- ----------- --------- ---------
High-
Specification
Floaters:
Ultra
Deepwater
Floaters 99% 98% 88% 98% 90%
Other
Deepwater
Floaters 79% 82% 75% 79% 75%
Other High-
Specification
Floaters 87% 99% 93% 95% 94%
Total High-
Specification
Floaters 87% 90% 82% 88% 83%
Other Floaters 89% 98% 86% 94% 78%
Jackups 90% 86% 96% 86% 93%
Other Rigs 98% 100% 76% 99% 64%
Total Drilling
Fleet 89% 91% 87% 89% 83%
(1) Average daily revenue is defined as contract drilling revenue
earned per revenue earning day in the period. A revenue earning
day is defined as a day for which a rig earns dayrate after
commencement of operations. Utilization is defined as the total
actual number of revenue earning days in the period as a
percentage of the total number of calendar days in the period
for all drilling rigs in our fleet.
Transocean Inc. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
Operating Income Before General and Administrative Expense
to Field Operating Income
(in millions)
Three months ended
----------------------------
Sept 30, June 30, Sept 30,
2007 2007 2006
-------- --------- --------
Operating revenue $1,538 $1,434 $1,025
Operating and maintenance expense 663 627 561
Depreciation 103 101 99
(Gain) loss from disposal of assets,
net (8) 1 (47)
-------- -------- --------
Operating income before general and
administrative expense 780 705 412
Add back (subtract): Depreciation 103 101 99
(Gain) loss from
disposal of
assets, net (8) 1 (47)
-------- -------- --------
Field operating income $ 875 $ 807 $ 464
-------- -------- --------
Nine months ended
-----------------
Sept 30, Sept 30,
2007 2006
-------- --------
Operating revenue $4,300 $2,696
Operating and maintenance expense 1,858 1,585
Depreciation 304 303
(Gain) loss from disposal of assets, net (30) (222)
-------- --------
Operating income before general and administrative
expense 2,168 1,030
Add back (subtract): Depreciation 304 303
(Gain) loss from disposal of
assets, net (30) (222)
-------- --------
Field operating income $2,442 $1,111
-------- --------
Transocean Inc. and Subsidiaries
Effective Tax Rate Analysis
(In millions)
Three months ended
-------------------------------------
September 30, June 30, September 30,
2007 2007 2006
------------- --------- -------------
Income (Loss) before income
taxes and minority interest $1,024 $ 643 $ 373
Add back (subtract): $ - $ -
(Gain) loss on disposal of
assets, net (9) 1 (44)
Income from TODCO tax
sharing agreement (276) - -
------------- --------- -------------
Adjusted income before income
taxes $ 739 $ 644 $ 329
Income tax expense $ 52 $ 93 $ 64
Add back (subtract):
(Gain) loss on disposal of
assets, net - - (3)
Changes in estimates (1) 52 11 (4)
------------- --------- -------------
Adjusted income tax expense (2) $ 104 $ 104 $ 57
Effective tax rate (3) 5.1% 14.4% 17.1%
Annual effective tax rate (4) 14.0% 16.1% 17.3%
Nine months ended Twelve months ended
----------------------- -------------------
September 30, Dec. 31
2007 2006 2006
------------ ---------- -------------------
Income (Loss) before income
taxes and minority
interest $2,305 $ 914 $1,607
Add back (subtract):
(Gain) loss on disposal
of assets, net (31) (219) (410)
Income from TODCO tax
sharing agreement (276) - (51)
------------ ---------- -------------------
Adjusted income before
income taxes $1,998 $ 695 $1,146
Income tax expense $ 230 $ 150 $ 222
Add back (subtract):
(Gain) loss on disposal
of assets, net (3) (25) (24)
Changes in estimates
(1) 65 (3) 14
------------ ---------- -------------------
Adjusted income tax expense
(2) $ 292 $ 122 $ 212
Effective tax rate (3) 10.0% 16.4% 13.8%
Annual effective tax rate
(4) 14.6% 17.5% 18.5%
(1) Our estimates change as we file tax returns, settle disputes with
tax authorities or become aware of other events and include
changes in deferred taxes, valuation allowances on deferred taxes
and other tax liabilities.
(2) The three months ended September 30, 2007 include $(4) million of
additional tax expense (benefit) reflecting the catch-up effect
of an increase (decrease) in the annual effective tax rate.
(3) Effective Tax Rate is income tax expense divided by income before
income taxes.
(4) Annual Effective Tax Rate is income tax expense excluding various
discrete items (such as changes in estimates and tax on items
excluded from income before income taxes) divided by income
before income taxes excluding gains on sales and similar items
pursuant to Financial Accounting Standards Board Interpretation
No. 18.
CONTACT: Transocean Inc., Houston |