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| Transocean Inc. Reports Third Quarter 2008 Financial Results |
HOUSTON--(BUSINESS WIRE)--Nov. 5, 2008--Transocean Inc. (NYSE:RIG) today reported net income for the three months ended September 30, 2008 of $1.106 billion, or $3.44 per diluted share, compared to net income of $973 million, or $4.63 per diluted share for the three months ended September 30, 2007. Revenues for the third quarter of 2008 were $3.192 billion compared to $1.538 billion for the third quarter of 2007. For the nine months ended September 30, 2008, net income totaled $3.402 billion, or $10.59 per diluted share, on revenues of $9.404 billion. For the same period in 2007, net income totaled $2.075 billion, or $9.87 per diluted share, on revenues of $4.300 billion. Net income for the nine months ended September 30, 2008 included after-tax charges of $16 million, or $0.05 per diluted share, resulting primarily from a $14 million loss on short-term investments, $10 million of discrete tax items, $3 million of merger-related costs and a $3 million loss from the early retirement of debt. These charges were offset by income of $14 million from the TODCO tax sharing agreement. For the same period last year, net income included after-tax gains of $369 million, or $1.75 per diluted share, from the TODCO tax sharing agreement, rig sales and discrete tax items. On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation and reclassified its ordinary shares into cash and shares (the "Reclassification"). Reported results for the third quarter and first nine months of 2008 include a full three and nine months, respectively, from GlobalSantaFe's operations. Diluted earnings per share for the third quarter and first nine months of 2007 exclude GlobalSantaFe's operations and are based on a weighted average diluted share count of 210 million and 211 million shares, respectively, which includes the effect of restating the historical diluted share count for the Reclassification. Operations Quarterly Review Revenues for the three months ended September 30, 2008 were $3.192 billion compared to revenues of $3.102 billion during the three months ended June 30, 2008. The $90 million quarter-to-quarter increase in total revenues included $112 million of higher contract drilling revenues reflecting a decrease in out-of-service time for planned shipyards, an increase in average dayrates and a $25 million increase in other revenues primarily from increases in integrated services and non-drilling activities. A $47 million decline in contract drilling intangible revenues partially offset these increases. The average dayrate for the fleet increased two percent from $238,600 in the second quarter to $242,200 in the third quarter, primarily as a result of rigs commencing new contracts at higher dayrates in the third quarter. Operating and maintenance expenses for the three months ended September 30, 2008 were $1.426 billion compared to $1.364 billion for the prior three-month period. The $62 million increase in operating and maintenance expenses primarily reflects estimated expenses of $44 million related to dropped riser and an increase in maintenance and non-drilling and integrated services costs compared to the second quarter of 2008, partially offset by reduced shipyard costs. Interest Expense and Liquidity Interest expense, net of amounts capitalized, for the third quarter of 2008 decreased to $100 million compared to $111 million for the second quarter of 2008. The decrease resulted primarily from a quarter-to-quarter reduction in total debt of approximately $496 million. As of September 30, 2008, total debt was $14.783 billion compared to $15.279 billion as of June 30, 2008. Cash flow from operating activities totaled $1.270 billion for the third quarter of 2008 compared to $1.011 billion for the second quarter of 2008. Higher quarter-to-quarter cash flow during the third quarter primarily reflects increases in net income, decreases in deferred expenses and deferred taxes, partially offset by an increase in working capital. Effective Tax Rate The Annual Effective Tax Rate(1) for each of the third quarter and first nine months of 2008 was 15.1 percent and 13.3 percent, respectively. The Effective Tax Rate(2) for first nine months of 2008 was 13.6 percent, which reflects the impact of various discrete tax items totaling $7 million, primarily related to changes in estimates. The Effective Tax Rate(2) for the third quarter of 2008 was 13.7 percent. Conference Call Information Transocean will conduct a teleconference call at 10:00 a.m. Eastern Time on November 5, 2008. To participate, dial 913-981-5568 and refer to confirmation code 7057401 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 "3Q08 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 November 5, 2008 and can be accessed by dialing 719-457-0820 and referring to the passcode 7057401. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Transocean Inc. is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 136 mobile offshore drilling units plus 10 announced ultra-deepwater newbuild units, the company'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. The company owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 29 Midwater Floaters, 10 High-Specification Jackups, 54 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide. (1) 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 "Supplemental Effective Tax Rate Analysis." (2) Effective Tax Rate is defined as income tax expense divided by income before income taxes. See the accompanying schedule entitled "Supplemental 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,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Operating revenues
Contract drilling revenues $ 2,699 $ 1,455 $ 7,926 $ 4,088
Contract drilling
intangible revenues 143 -- 557 --
Other revenues 350 83 921 212
----------------------------------------------------------------------
3,192 1,538 9,404 4,300
----------------------------------------------------------------------
Costs and expenses
Operating and maintenance 1,426 663 3,947 1,858
Depreciation, depletion
and amortization 336 103 1,040 304
General and administrative 46 27 140 82
----------------------------------------------------------------------
1,808 793 5,127 2,244
----------------------------------------------------------------------
Gain (loss) from disposal of
assets, net (1) 8 (4) 30
----------------------------------------------------------------------
Operating income 1,383 753 4,273 2,086
----------------------------------------------------------------------
Other income (expense), net
Interest income 7 7 30 17
Interest expense, net of
amounts capitalized (100) (23) (348) (93)
Other, net (12) 287 (23) 295
----------------------------------------------------------------------
(105) 271 (341) 219
----------------------------------------------------------------------
Income before income taxes
and minority interest 1,278 1,024 3,932 2,305
Income tax expense 175 52 533 230
Minority interest (3) (1) (3) --
----------------------------------------------------------------------
Net income $ 1,106 $ 973 $ 3,402 $ 2,075
======================================================================
Earnings per share
Basic $ 3.47 $ 4.80 $ 10.69 $ 10.25
Diluted $ 3.44 $ 4.63 $ 10.59 $ 9.87
======================================================================
Weighted average shares
outstanding
Basic 319 203 318 202
Diluted 321 210 321 211
======================================================================
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
September 30, December 31,
2008 2007
------------- ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 829 $ 1,241
Short-term investments 392 --
Accounts receivable, net of allowance for
doubtful accounts of $65 and $50 at
September 30, 2008 and December 31, 2007,
respectively 2,783 2,370
Materials and supplies, net of allowance
for obsolescence of $28 and $22 at
September 30, 2008 and December 31, 2007,
respectively 429 333
Deferred income taxes, net 55 119
Assets held for sale 564 --
Other current assets 236 233
----------------------------------------------------------------------
Total current assets 5,288 4,296
----------------------------------------------------------------------
Property and equipment 25,152 24,545
Less accumulated depreciation 4,597 3,615
----------------------------------------------------------------------
Property and equipment, net 20,555 20,930
----------------------------------------------------------------------
Goodwill 8,346 8,219
Other assets 976 919
----------------------------------------------------------------------
Total assets $ 35,165 $ 34,364
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 934 $ 805
Accrued income taxes 234 99
Debt due within one year 932 6,172
Other current liabilities 853 826
----------------------------------------------------------------------
Total current liabilities 2,953 7,902
----------------------------------------------------------------------
Long-term debt 13,851 11,085
Deferred income taxes, net 755 681
Other long-term liabilities 1,528 2,125
----------------------------------------------------------------------
Total long-term liabilities 16,134 13,891
----------------------------------------------------------------------
Commitments and contingencies
Minority interest 3 5
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,
319,068,820 and 317,222,909 shares issued
and outstanding at September 30, 2008 and
December 31, 2007, respectively 3 3
Additional paid-in capital 10,911 10,799
Accumulated other comprehensive loss (46) (42)
Retained earnings 5,207 1,806
----------------------------------------------------------------------
Total shareholders' equity 16,075 12,566
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 35,165 $ 34,364
======================================================================
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Cash flows from operating
activities
Net income $ 1,106 $ 973 $ 3,402 $ 2,075
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Amortization of
drilling contract
intangibles (143) -- (557) --
Depreciation,
depletion and
amortization 336 103 1,040 304
Share-based
compensation expense 16 11 49 30
(Gain) loss from
disposal of assets,
net 1 (8) 4 (30)
Impairment of short-
term investments 16 -- 16 --
Deferred revenue, net (3) (20) 22 18
Deferred expenses,
net (3) (4) (132) (17)
Deferred income taxes 60 9 4 2
Other, net (6) 2 3 6
Changes in operating
assets and liabilities (110) (169) (88) (230)
----------------------------------------------------------------------
Net cash provided by
operating activities 1,270 897 3,763 2,158
----------------------------------------------------------------------
Cash flows from investing
activities
Capital expenditures (514) (305) (1,703) (1,060)
Proceeds from
disposal of assets,
net 5 21 352 62
Proceeds from sale of
investments 14 -- 14 --
Short-term
investments (408) -- (408) --
Joint ventures and
other investments,
net -- -- (3) (3)
----------------------------------------------------------------------
Net cash used in
investing activities (903) (284) (1,748) (1,001)
----------------------------------------------------------------------
Cash flows from financing
activities
Borrowings
(repayments) under
commercial paper
program, net (213) -- 932 --
Borrowings
(repayments) under
revolving credit
facilities, net 415 -- (1,085) --
Proceeds from debt 303 -- 2,354 --
Repayments of debt (1,000) (470) (4,673) (700)
Repurchase of
ordinary shares -- -- -- (400)
Proceeds from
(payments made upon)
exercise of
warrants, net -- 16 (4) 16
Proceeds from (taxes
paid for) issuance
of ordinary shares
under share-based
compensation plans,
net (12) 1 49 56
Excess tax benefit
from issuance of
ordinary shares
under share-based
compensation plans -- 23 11 33
Other, net (7) (10) (11) (11)
----------------------------------------------------------------------
Net cash used in
financing activities (514) (440) (2,427) (1,006)
----------------------------------------------------------------------
Net increase (decrease)
in cash and cash
equivalents (147) 173 (412) 151
Cash and cash equivalents
at beginning of period 976 445 1,241 467
----------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 829 $ 618 $ 829 $ 618
======================================================================
Transocean Inc.
Fleet Operating Statistics
Operating Revenues ($ Millions) (1)
-------------------------------------------------
Nine months ended
Three months ended September 30,
----------------------------- -------------------
September September
30, June 30, 30,
2008 2008 2007 2008 2007
--------- --------- --------- --------- ---------
Contract Drilling
Revenues
High-Specification
Floaters:
Ultra Deepwater
Floaters $ 617 $ 558 $ 381 $ 1,783 $ 1,057
Deepwater
Floaters 323 377 280 1,025 778
Harsh Environment
Floaters 163 168 122 481 358
Total High-
Specification
Floaters 1,103 1,103 783 3,289 2,193
Midwater Floaters 690 650 409 2,015 1,177
High-Specification
Jackups 144 147 12 448 36
Standard Jackups 749 674 236 2,134 637
Other Rigs 13 13 15 40 45
Subtotal 2,699 2,587 1,455 7,926 4,088
Contract Intangible
Revenue 143 190 0 557 0
Other Revenues
Client Reimbursable
Revenues 55 51 32 152 91
Integrated Services
and Other 12 48 51 8 121
Drilling Management
Services 257 208 0 693 0
Oil and Gas
Properties 26 18 0 68 0
Subtotal 350 325 83 921 212
Total Company $ 3,192 $ 3,102 $ 1,538 $ 9,404 $ 4,300
Average Dayrates (1)
-------------------------------------------------
Nine months ended
Three months ended September 30,
----------------------------- -------------------
September September
30, June 30, 30,
2008 2008 2007 2008 2007
--------- --------- --------- --------- ---------
High-Specification
Floaters:
Ultra Deepwater
Floaters $401,300 $390,400 $323,200 $390,700 $304,600
Deepwater
Floaters $322,700 $317,400 $251,600 $307,600 $227,400
Harsh Environment
Floaters $363,500 $379,400 $312,300 $362,400 $281,100
Total High-
Specification
Floaters $369,300 $360,500 $291,900 $356,600 $268,600
Midwater Floaters $292,900 $299,300 $254,000 $294,800 $240,100
High-Specification
Jackups $178,500 $178,000 $131,600 $176,700 $131,800
Standard Jackups $158,700 $149,400 $120,000 $151,400 $113,800
Other Rigs $ 48,900 $ 48,400 $ 54,800 $ 49,000 $ 54,100
Total Drilling Fleet $242,200 $238,600 $219,700 $236,500 $206,800
Utilization (1)
-------------------------------------------------
Nine months ended
Three months ended September 30,
----------------------------- -------------------
September September
30, June 30, 30,
2008 2008 2007 2008 2007
--------- --------- --------- --------- ---------
High-Specification
Floaters:
Ultra Deepwater
Floaters 93% 87% 99% 93% 98%
Deepwater
Floaters 68% 81% 76% 76% 78%
Harsh Environment
Floaters 98% 98% 85% 97% 93%
Total High-
Specification
Floaters 83% 86% 86% 86% 88%
Midwater Floaters 88% 82% 92% 86% 95%
High-Specification
Jackups 87% 91% 100% 93% 100%
Standard Jackups 93% 89% 89% 92% 85%
Other Rigs 100% 100% 98% 100% 99%
Total Drilling Fleet 89% 87% 89% 89% 89%
(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
Supplemental Effective Tax Rate Analysis
(In millions)
Nine months Years ended
Three months ended ended Dec. 31,
--------------------- -------------- --------------
Sept. June Sept. Sept. Sept.
30, 30, 30, 30, 30,
2008 2008 2007 2008 2007 2007 2006
--------------------- -------------- --------------
Income (Loss)
before income
taxes and
minority interest $1,278 $1,246 $1,024 $3,932 $2,305 $3,384 $1,607
Add back
(subtract):
(Gain) loss on
disposal of
assets, net - - (9) - (31) (264) (410)
Income from
TODCO tax
sharing
agreement (14) - (276) (14) (276) (277) (51)
Loss on The
Reserve
Funds 16 - - 16 - - -
(Gain) loss
on
retirement
of debt - 1 - 3 - 8 -
GSF Merger
related
costs 1 3 - 5 - 82 -
--------------------- -------------- --------------
Adjusted income
before income
taxes 1,281 1,250 739 3,942 1,998 2,933 1,146
Income tax expense 175 140 52 533 230 253 222
Add back
(subtract):
(Gain) loss on
disposal of
assets, net - - - - (3) (3) (24)
Loss on The
Reserve
Funds 2 - - 2 - - -
GSF Merger
related
costs 1 - - 1 - 15 -
Changes in
estimates (1) 15 2 52 (10) 65 101 14
--------------------- -------------- --------------
Adjusted income
tax expense (2) $ 193 $ 142 $ 104 $ 526 $ 292 $ 366 $ 212
===================== ============== ==============
Effective Tax Rate
(3) 13.7% 11.2% 5.1% 13.6% 10.0% 7.5% 13.8%
Annual Effective
Tax Rate (4) 15.1% 11.4% 14.0% 13.3% 14.6% 12.5% 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 Sept. 30, 2008 include $21 million of
additional tax expense (benefit) reflecting the catch-up effect
of an increase (decrease) in the annual effective tax rate from
the previous quarter estimate.
(3) Effective Tax Rate is income tax expense divided by income before
income taxes.
(4) Annual Effective Tax Rate is income tax expense excluding various
discrete items (such as changes in estimates and tax on items
excluded from income before income taxes) divided by income
before income taxes excluding gains on sales and similar items
pursuant to Financial
Transocean Inc. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
Operating Income Before General and Administrative Expense
to Field Operating Income
(in US$ millions)
Three months ended Nine months ended
---------------------------- -------------------
September June 30, September September September
30, 2008 2008 30, 2007 30, 2008 30, 2007
--------- -------- --------- --------- ---------
Operating revenue $ 3,192 $ 3,102 $ 1,538 $ 9,404 $ 4,300
Operating and
maintenance
expense 1,426 1,364 663 3,947 1,858
Depreciation,
depletion and
amortization 336 337 103 1,040 304
(Gain) loss from
disposal of
assets, net 1 6 (8) 4 (30)
--------- -------- --------- --------- ---------
Operating income
before general and
administrative
expense 1,429 1,395 780 4,413 2,168
Add back (subtract):
Depreciation,
depletion and
amortization 336 337 103 1,040 304
(Gain) loss from
disposal of
assets, net 1 6 (8) 4 (30)
--------- -------- --------- --------- ---------
Field operating
income $ 1,766 $ 1,738 $ 875 $ 5,457 $ 2,442
--------- -------- --------- --------- ---------
CONTACT: Transocean Inc., Houston |