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| Transocean Ltd. Reports Second Quarter 2010 Results |
ZUG, SWITZERLAND, Aug 04, 2010 (MARKETWIRE via COMTEX) -- Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest for the three months ended June 30, 2010 of $715 million, or $2.22 per diluted share, on revenues of $2.505 billion. The results compare to net income attributable to controlling interest of $806 million, or $2.49 per diluted share, on revenues of $2.882 billion, for the three months ended June 30, 2009. Second quarter 2010 results included increased expenses associated with the Macondo well incident of $82 million, or $69 million after tax at our Annual Effective Tax Rate. These expenses include insurance deductibles, legal costs, increased insurance premiums, internal investigation costs and professional fees. In addition, second quarter 2010 results were favorably impacted by $249 million, after tax, as follows:
Second quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $96 million, or $0.30 per diluted share, including $67 million primarily related to write-downs of assets held for sale and a $29 million net loss primarily related to discrete tax items, the retirement of debt and the sale of an interest in a joint venture. Operations Quarterly Review Revenues for the three months ended June 30, 2010 decreased to $2.505 billion compared to $2.602 billion during the three months ended March 31, 2010. The $97 million decrease was primarily due to contract drilling revenue reductions, including $80 million resulting from the stacking of rigs, $69 million from rigs operating on contracts at lower dayrates, $61 million from increased rig time in shipyards and mobilizations and $37 million associated with the loss of Deepwater Horizon. The decrease was partially offset by an $80 million increase in drilling management services revenues, a $54 million increase in contract drilling revenue from newly-constructed ultra-deepwater rigs commencing or continuing operations in the second quarter and $16 million of other minor variances. Operating and maintenance expenses totaled $1.358 billion for the second quarter 2010, up approximately 14 percent compared to $1.196 billion for the prior quarter. The $162 million quarter-to-quarter increase in operating and maintenance costs occurred as a result of $82 million of increased costs from insurance deductibles and legal costs associated with the Macondo well incident, a $65 million increase in drilling management services costs and $17 million of additional operating costs related to increased activity associated with newly-constructed ultra-deepwater rigs. General and administrative expenses were $58 million for the second quarter 2010, compared to $63 million in the first quarter 2010. The $5 million decrease was primarily due to higher share-based compensation expenses in the first quarter. Liquidity and Interest Expense Interest expense, net of amounts capitalized in the second quarter 2010, totaled $141 million, compared to $132 million in the prior quarter. The increase was primarily due to reduced capitalized interest related to the commencement of operations of newly-constructed ultra-deepwater drillships in the first and second quarters. As of June 30, 2010, total debt was $11.426 billion, compared to $11.439 billion as of March 31, 2010, a decrease of $13 million. Cash flow from operating activities totaled $1.269 billion for the second quarter 2010, up from $1.172 billion for the first quarter 2010. As of June 30, 2010, the company had cash and cash equivalents of $2.888 billion, compared to $1.586 billion at March 31, 2010. The increase is principally due to operating cash flow and the receipt of $560 million in insurance proceeds for the loss of Deepwater Horizon. Effective Tax Rate Transocean's reported Effective Tax Rate(1) for the second quarter 2010 was 12.0 percent and included certain discrete items consisting primarily of the gain resulting from the insurance recoveries on the loss of Deepwater Horizon and changes in prior years tax estimates. Excluding these discrete items the Annual Effective Tax Rate(2) for the second quarter was 16.3 percent. Update on Distribution Through Par Value Reduction In May 2010, at our Annual General Meeting, our shareholders approved a cash distribution in the form of a par value reduction in the aggregate amount of CHF 3.44 per issued share, equal to approximately $3.19 using an exchange rate of USD 1.00 to CHF 1.08 as of the close of trading on June 30, 2010. We expect the cash distribution to be calculated and paid in four quarterly installments. Under Swiss law, upon satisfaction of all legal requirements, we must submit an application to the commercial register in the Canton of Zug to register the applicable par value reduction. We have submitted to the commercial register of the Canton of Zug our application for registration of the initial installment. The cantonal commercial register is currently reviewing our application, and although we believe that all registration requirements have been met, the Swiss authorities have indicated to us that the review process will take longer than customary in light of lawsuits filed in the U.S. and served on the company in Switzerland. They have indicated that they will seek guidance from the Swiss Federal Office of the Commercial Register on whether the requirements for the registration of the first installment have been met. Given the expected extended review of our application by the competent Swiss authorities, the payment of the first installment will be delayed. If the Swiss authorities disagree with our view that all registration requirements have been met, our ability to pay the distribution installments could be further delayed or restricted indefinitely. A delay of the first installment will likely also result in a delay of the remaining three installments, which were expected to be paid in October 2010, January 2011 and April 2011, subject to the satisfaction of the applicable Swiss legal requirements. Update on Discussions with the U.S. Department of Justice On June 28, 2010, we received a letter from the U.S. Department of Justice (DOJ) asking us to meet with them to discuss our financial responsibilities in connection with the Macondo well incident and requesting that we provide them certain financial and organizational information. The letter also requested that we provide the DOJ advance notice of certain corporate actions involving the transfer of cash or other assets outside the ordinary course of business. After preliminary discussions with the DOJ, we have voluntarily agreed to provide them with 30 days notice prior to repurchasing any additional shares under our share repurchase program and prior to making substantial cash payments out of our U.S. entities, other than in the ordinary course of business. We expect to engage in further discussions with the DOJ in the future. Update on Macondo Well Incident We have filed a Quarterly Report on Form 10-Q with the United States Securities and Exchange Commission, including the relevant drilling contract between subsidiaries of Transocean and BP as an exhibit. The Form 10-Q includes updated information on the Macondo well incident. To view the Form 10-Q filing, please use the following link: http://www.deepwater.com/fw/main/SEC-Filings-57.html. Forward-Looking Statements Statements regarding the distribution to shareholders, including the timing and amount of the distribution and review by the Swiss authorities, share repurchases and discussions with the DOJ, as well as any other statements that are not historical facts, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to compliance with legal requirements, operating hazards and delays, actions by governmental and regulatory authorities, customers and other third parties, the future price of oil and gas, the actual revenues earned and other factors detailed in the company's most recent Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission ("SEC"), which are available free of charge on the SEC's website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Additional information regarding the distribution may be found in the company's most recent Form 10-Q, proxy statement and other filings made with the SEC. Conference Call Information Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on August 5, 2010. To participate, dial +1 719-325-4929 and refer to confirmation code 1148497 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 "2Q10 Charts," has been posted to Transocean's website and can 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 August 5, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the passcode 1148497. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Transocean is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 139 mobile offshore drilling units plus three ultra-deepwater newbuild drillships 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 45 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 26 Midwater Floaters, 10 High-Specification Jackups, 55 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide. (1) 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." (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 tax expense) divided by income before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis." TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Operating revenues
Contract drilling revenues $ 2,290 $ 2,625 $ 4,731 $ 5,459
Contract drilling
intangible revenues 29 75 62 179
Other revenues 186 182 314 362
--------- --------- --------- ---------
2,505 2,882 5,107 6,000
--------- --------- --------- ---------
Costs and expenses
Operating and maintenance 1,358 1,277 2,554 2,448
Depreciation, depletion and
amortization 400 360 801 715
General and administrative 58 53 121 109
--------- --------- --------- ---------
1,816 1,690 3,476 3,272
--------- --------- --------- ---------
Loss on impairment -- (67) (2) (288)
Gain (loss) on disposal of
assets, net 268 (4) 254 --
--------- --------- --------- ---------
Operating income 957 1,121 1,883 2,440
--------- --------- --------- ---------
Other income (expense), net
Interest income 5 1 10 2
Interest expense, net of
amounts capitalized (141) (114) (273) (250)
Gain (loss) on retirement
of debt -- (8) 2 (10)
Other, net (3) (8) 10 --
--------- --------- --------- ---------
(139) (129) (251) (258)
--------- --------- --------- ---------
Income before income tax
expense 818 992 1,632 2,182
Income tax expense 98 184 227 435
--------- --------- --------- ---------
Net income 720 808 1,405 1,747
Net income (loss) attributable
to noncontrolling interest 5 2 13 (1)
--------- --------- --------- ---------
Net income attributable to
controlling interest $ 715 $ 806 $ 1,392 $ 1,748
========= ========= ========= =========
Earnings per share
Basic $ 2.23 $ 2.50 $ 4.32 $ 5.43
Diluted $ 2.22 $ 2.49 $ 4.31 $ 5.42
Weighted average shares
outstanding
Basic 319 320 320 320
Diluted 320 321 321 321
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
June 30, December 31,
2010 2009
------------ ------------
(Unaudited)
Assets
Cash and cash equivalents $ 2,888 $ 1,130
Accounts receivable, net of allowance for
doubtful accounts of $41 and $65 at June 30,
2010 and December 31, 2009, respectively 2,254 2,385
Materials and supplies, net of allowance for
Obsolescence of $66 at June 30, 2010 and
December 31, 2009 467 462
Deferred income taxes, net 121 104
Assets held for sale -- 186
Other current assets 184 209
------------ ------------
Total current assets 5,914 4,476
------------ ------------
Property and equipment 27,377 27,383
Property and equipment of consolidated variable
interest entities 2,179 1,968
Less accumulated depreciation 7,034 6,333
------------ ------------
Property and equipment, net 22,522 23,018
------------ ------------
Goodwill 8,132 8,134
Other assets 984 808
------------ ------------
Total assets $ 37,552 $ 36,436
============ ============
Liabilities and equity
Accounts payable $ 968 $ 780
Accrued income taxes 154 240
Debt due within one year 1,580 1,568
Debt of consolidated variable interest entities
due within one year 82 300
Other current liabilities 1,884 730
------------ ------------
Total current liabilities 4,668 3,618
------------ ------------
Long-term debt 8,862 8,966
Long-term debt of consolidated variable
interest entities 902 883
Deferred income taxes, net 710 726
Other long-term liabilities 1,683 1,684
------------ ------------
Total long-term liabilities 12,157 12,259
------------ ------------
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947
authorized, 167,617,649 conditionally
authorized, 335,235,298 issued at June 30, 2010
and December 31, 2009; 318,916,207 and
321,223,882 outstanding at June 30, 2010 and
December 31, 2009, respectively 4,479 4,472
Additional paid-in capital 6,421 7,407
Treasury shares, at cost, 2,863,267 and none
held at June 30, 2010 and December 31, 2009,
respectively (240) --
Retained earnings 10,400 9,008
Accumulated other comprehensive loss (336) (335)
------------ ------------
Total controlling interest shareholders'
equity 20,724 20,552
------------ ------------
Noncontrolling interest 3 7
------------ ------------
Total equity 20,727 20,559
------------ ------------
Total liabilities and equity $ 37,552 $ 36,436
============ ============
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, except share data)
Three months Six months ended
ended June 30, June 30,
---------------- ----------------
2010 2009 2010 2009
------- ------- ------- -------
Cash flows from operating activities
Net income $ 720 $ 808 $ 1,405 $ 1,747
Adjustments to reconcile net income to
net cash provided by operating
activities
Amortization of drilling
contract intangibles (29) (75) (62) (179)
Depreciation, depletion and
amortization 400 360 801 715
Share-based compensation expense 18 24 53 43
Excess tax benefit from
share-based compensation plans (1) -- (1) (1)
(Gain) loss on disposal of assets,
net (268) 4 (254) --
Loss on impairment -- 67 2 288
(Gain) loss on retirement of debt -- 8 (2) 10
Amortization of debt issue costs,
discounts and premiums, net 51 57 100 109
Deferred income taxes (12) 20 (34) 26
Other, net (6) 14 (1) 23
Deferred revenue, net 7 49 158 43
Deferred expenses, net (23) (37) (37) (35)
Changes in operating assets and
liabilities 412 277 313 228
------- ------- ------- -------
Net cash provided by operating
activities 1,269 1,576 2,441 3,017
------- ------- ------- -------
Cash flows from investing activities
Capital expenditures (300) (947) (679) (1,655)
Proceeds from disposal of assets,
net 10 -- 51 8
Proceeds from insurance recoveries
for loss of drilling unit 560 -- 560 --
Proceeds from payments on notes
receivable 11 -- 21 --
Proceeds from short-term
investments -- 172 5 393
Purchases of short-term investments -- (234) -- (234)
Joint ventures and other
investments, net (1) -- (1) --
------- ------- ------- -------
Net cash provided by (used in)
investing activities 280 (1,009) (43) (1,488)
------- ------- ------- -------
Cash flows from financing activities
Change in short-term borrowings,
net (46) (476) (177) (500)
Proceeds from debt -- 231 54 319
Repayments of debt (22) (708) (275) (1,410)
Payments for warrant exercises, net -- (13) -- (13)
Purchases of shares held in
treasury (180) -- (240) --
Proceeds from (taxes paid for)
share-based compensation plans,
net 3 5 (1) 22
Excess tax benefit from share-based
compensation plans 1 -- 1 1
Other, net (3) (1) (2) (4)
------- ------- ------- -------
Net cash used in financing activities (247) (962) (640) (1,585)
------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents 1,302 (395) 1,758 (56)
Cash and cash equivalents at beginning
of period 1,586 1,302 1,130 963
------- ------- ------- -------
Cash and cash equivalents at end of
period $ 2,888 $ 907 $ 2,888 $ 907
======= ======= ======= =======
TRANSOCEAN LTD.
FLEET OPERATING STATISTICS
Operating Revenues ($ Millions) (1)
------------------------------------------------
Three months ended Six months ended
---------------------------- ------------------
June 30, March June 30, June 30, June 30,
2010 31, 2010 2009 2010 2009
-------- -------- -------- -------- --------
Contract Drilling
Revenues
High-Specification
Floaters:
Ultra Deepwater
Floaters $ 809 $ 901 $ 673 $ 1,710 $ 1,375
Deepwater Floaters 382 390 406 772 819
Harsh Environment
Floaters 166 176 159 342 317
Total
High-Specification
Floaters 1,357 1,467 1,238 2,824 2,511
Midwater Floaters 521 522 644 1,044 1,352
High-Specification
Jackups 93 94 128 186 278
Standard Jackups 312 352 608 664 1,298
Other Rigs 7 6 7 13 20
Subtotal 2,290 2,441 2,625 4,731 5,459
Contract Intangible
Revenue 29 33 75 62 179
Other Revenues
Client Reimbursable
Revenues 38 40 48 78 98
Integrated Services and
Other 11 30 52 42 105
Drilling Management
Services 129 51 74 179 145
Oil and Gas Properties 8 7 8 15 14
Subtotal 186 128 182 314 362
Total Company $ 2,505 $ 2,602 $ 2,882 $ 5,107 $ 6,000
Average Daily Revenue (1)
------------------------------------------------
Three months ended Six months ended
---------------------------- ------------------
June 30, March June 30, June 30, June 30,
2010 31, 2010 2009 2010 2009
-------- -------- -------- -------- --------
High-Specification
Floaters:
Ultra Deepwater
Floaters $482,100 $486,000 $450,500 $484,100 $450,800
Deepwater Floaters $395,800 $383,800 $339,600 $389,600 $338,200
Harsh Environment
Floaters $428,500 $400,100 $374,500 $413,400 $362,500
Total
High-Specification
Floaters $447,800 $443,200 $397,600 $445,400 $395,700
Midwater Floaters $319,000 $331,600 $302,700 $325,200 $308,900
High-Specification
Jackups $146,100 $166,000 $161,400 $155,500 $165,700
Standard Jackups $117,100 $133,100 $149,200 $125,000 $152,900
Other Rigs $ 72,000 $ 72,700 $ 48,300 $ 72,400 $ 47,300
Total Drilling Fleet $284,200 $298,300 $255,900 $291,300 $256,200
Utilization (1)
------------------------------------------------
Three months ended Six months ended
---------------------------- ------------------
June 30, March June 30, June 30, June 30,
2010 31, 2010 2009 2010 2009
-------- -------- -------- -------- --------
High-Specification
Floaters:
Ultra Deepwater
Floaters 76% 88% 91% 82% 94%
Deepwater Floaters 66% 71% 82% 68% 84%
Harsh Environment
Floaters 85% 98% 93% 91% 96%
Total
High-Specification
Floaters 74% 83% 88% 78% 90%
Midwater Floaters 69% 67% 84% 68% 86%
High-Specification
Jackups 70% 63% 87% 66% 93%
Standard Jackups 53% 53% 82% 53% 85%
Other Rigs 50% 50% 59% 50% 80%
Total Drilling Fleet 64% 66% 84% 65% 87%
(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 Ltd. and Subsidiaries
Supplemental Effective Tax Rate Analysis
(In millions)
Three months ended Six months ended
------------------------- ----------------
June March June June June
30, 31, 30, 30, 30,
2010 2010 2009 2010 2009
------- ------- ------- ------- -------
Income before income taxes $ 818 $ 814 $ 992 $ 1,632 $ 2,182
Add back (subtract):
Litigation matters 12 - - 12 -
Gain on loss of Deepwater
Horizon (267) - - (267) -
Loss on disposal of other
assets, net - 14 3 14 3
Loss on impairment of
goodwill and intangible
assets - 2 9 2 9
Loss on impairment of
other assets - 21 - 21 -
Loss on impairment of
assets held for sale - - 58 - 279
(Gain) loss on retirement
of debt - (2) 8 (2) 10
GSF merger related costs
and other, net - 6 2 6 8
------- ------- ------- ------- -------
Adjusted income before income
taxes 563 855 1,072 1,418 2,491
Income tax expense 98 129 184 227 435
Add back (subtract):
Loss on impairment of oil
and gas properties (7) 7 - - -
GSF merger related costs - 1 - 1 1
Tax effect of the Patient
Protection and Affordable
Care Act - (2) - (2) -
Changes in estimates (1) 1 (7) (16) (6) (52)
------- ------- ------- ------- -------
Adjusted income tax expense
(2) $ 92 $ 128 $ 168 $ 220 $ 384
======= ======= ======= ======= =======
Effective Tax Rate (3) 12.0% 15.8% 18.5% 13.9% 19.9%
Annual Effective Tax Rate (4) 16.3% 15.0% 15.7% 15.5% 15.4%
(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 June 30, 2010 includes $4 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.
SOURCE: Transocean Ltd. |