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Transocean Ltd. Reports Third Quarter 2012 Results

ZUG, SWITZERLAND--(Marketwire - Nov 4, 2012) - Transocean Ltd. ( NYSE : RIG ) ( SIX : RIGN )

  • Third quarter 2012 revenues were $2.440 billion compared with $2.352 billion in the second quarter 2012;
  • Operating and maintenance expenses for the third quarter were $1.338 billion, compared with $1.381 billion for the second quarter 2012. Second quarter operating and maintenance expenses exclude $750 million for estimated loss contingencies associated with the Macondo well incident;
  • Third quarter 2012 net loss attributable to controlling interest was $381 million, which included $880 million of net unfavorable items primarily associated with the impairment of assets included in discontinued operations. This compares with the second quarter 2012 net loss attributable to controlling interest of $304 million, which included $621 million of net unfavorable items;
  • Third quarter Annual Effective Tax Rate(3) from continuing operations was 15.2 percent compared with 28.2 percent in the second quarter 2012;
  • Third quarter net loss attributable to controlling interest was $1.06 per diluted share. After adjusting for net unfavorable items, adjusted earnings from continuing operations were $499 million, or $1.37 per diluted share;
  • Cash flows from operating activities were $786 million in the third quarter, compared with $459 million in the second quarter 2012;
  • Revenue efficiency(1) from continuing operations was 94.3 percent in the third quarter, compared with 92.1 percent in the second quarter 2012. Third quarter 2012 Ultra-Deepwater revenue efficiency was 95.8 percent, compared with 92.2 percent in the prior quarter. Fleet utilization(2) from continuing operations was 77 percent in the third quarter, compared with 72 percent in the second quarter 2012; and
  • New contracts associated with continuing operations totaling $10.2 billion were secured in the Fleet Status Report periods July 18, 2012 through October 17, 2012. Backlog from continuing operations was $29.7 billion at October 17th, a net increase of $8.3 billion.

Transocean Ltd. ( NYSE : RIG ) ( SIX : RIGN ) today reported a net loss attributable to controlling interest of $381 million, or $1.06 per diluted share, for the three months ended September 30, 2012. Third quarter 2012 results included net unfavorable items of $880 million, or $2.43 per diluted share. The results compare with a net loss attributable to controlling interest of $32 million, or $0.10 per diluted share, for the three months ended September 30, 2011. Third quarter 2011 results included net unfavorable items of $68 million, or $0.21 per diluted share, primarily associated with the company's acquisition of Aker Drilling.

Net unfavorable items, after tax, impacting the third quarter of 2012 included the following:

  • $878 million, or $2.43 per diluted share, loss on impairment of assets included in discontinued operations primarily associated with exiting the standard jackup market;
  • $48 million, or $0.13 per diluted share, net gain on the sale of two floaters, Discoverer 534 and Jim Cunningham;
  • $30 million, or $0.08 per diluted share, loss from discontinued operations. This includes $24 million, or $0.06 per diluted share associated with the standard jackups; the remainder is primarily associated with Challenger Minerals (North Sea) Limited; and
  • $20 million, or $0.05 per diluted share, loss due to discrete taxes and other items.

After adjusting for these net unfavorable items, adjusted earnings from continuing operations were $499 million, or $1.37 per diluted share. A reconciliation of the non-GAAP adjusted net income and diluted earnings per share is attached.

Operations Quarterly Review

Revenues from continuing operations for the three months ended September 30, 2012 were $2.440 billion, compared with revenues of $2.352 billion during the three months ended June 30, 2012. Contract drilling revenues increased $136 million mainly due to higher revenue efficiency(1) primarily on Ultra-Deepwater floaters, and lower out of service time. Revenue efficiency(1) from continuing operations was 94.3 percent for the third quarter, compared with 92.1 percent in the second quarter 2012. Other revenues decreased $48 million to $130 million for the third quarter 2012, compared with $178 million in the prior quarter, primarily due to decreased levels of low-margin drilling management services activity.

Operating and maintenance expenses from continuing operations decreased $43 million to $1.338 billion for the third quarter of 2012. This compares with $1.381 billion for the second quarter of 2012, excluding $750 million for estimated loss contingencies associated with the Macondo well incident. Contract drilling expenses increased by $17 million due to annual pay raises, activity increases, professional fees, and various other items, partly offset by lower costs in the third quarter associated with rigs undergoing surveys, contract preparation or other shipyard projects. The delayed commencement of shipyard projects favorably impacted contract drilling expenses in the third quarter. Costs associated with the company's drilling management services reporting unit decreased $60 million mostly due to reduced activity.

General and administrative expenses were $69 million for the third quarter 2012, compared with $79 million in the previous quarter. The decrease was primarily due to transaction costs in the second quarter associated with the Quantum exchange of its 50 percent interest in Transocean Pacific Drilling Inc. for Transocean Ltd.'s shares.

Income Taxes

Transocean's third quarter Effective Tax Rate(4) from continuing operations was 16.5 percent, compared with 5.0 percent in the second quarter 2012. The increase in the Effective Tax Rate(4) was due to changes in estimates primarily for settlements of prior years' tax liabilities. Transocean's Annual Effective Tax Rate(3) from continuing operations for the third quarter 2012 was 15.2 percent. This compares with 28.2 percent for the prior quarter. The decrease was primarily due to changes in the blend of income that is taxed based on gross revenues versus pre-tax income and rig movements between taxing jurisdictions, among other things. Third quarter 2012 income tax expense included a favorable adjustment of $31 million, or $0.09 per diluted share, required to reflect a decrease in the Annual Effective Tax Rate(3) to 20.5 percent for the nine months ended September 30, 2012, from 24.6 percent for the first half of 2012.

Other Items

For the third quarter, interest expense, net of amounts capitalized, was $180 million, compared with $183 million in the second quarter 2012. Capitalized interest for the third quarter 2012 was $12 million, unchanged from the prior quarter. Interest income increased to $15 million in the third quarter, compared with $13 million in the second quarter 2012.

Cash flows from operating activities were $786 million for the third quarter, compared with $459 million for the second quarter 2012. Capital expenditures from total operations were $225 million for the third quarter, compared with $236 million in the second quarter of 2012.

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, the effect and results of litigation, assessments and contingencies, 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. EST, 4:00 p.m. CET, on Monday, November 5, 2012. To participate, dial +1 719-325-4828 and refer to confirmation code 2448847 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 that may be discussed during the conference call, titled "3Q12 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. EST, 7:00 p.m. CET, on November 5, 2012, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 2448847. 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. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world.

Transocean owns or has partial ownership interests in, and operates a fleet of 115 mobile offshore drilling units consisting of 48 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment drilling rigs), 25 Midwater Floaters, nine High-Specification Jackups, 32 Standard Jackups and one swamp barge. Included in the 115 drilling units, the company has 32 Standard Jackups and one swamp barge classified as discontinued operations. In addition, we have six Ultra-Deepwater Drillships and three High-Specification Jackups under construction.

For more information about Transocean, please visit the website at www.deepwater.com.

Notes

(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."

 
TRANSOCEAN LTD. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(In millions, except per share data)
(Unaudited)
 
    Three months ended
September 30,
    Nine months ended
September 30,
 
    2012     2011     2012     2011  
Operating revenues                                
  Contract drilling revenues   $ 2,310     $ 1,827     $ 6,498     $ 5,396  
  Other revenues     130       164       420       576  
      2,440       1,991       6,918       5,972  
Costs and expenses                                
  Operating and maintenance     1,338       1,344       4,731       3,915  
  Depreciation and amortization     280       281       846       821  
  General and administrative     69       67       217       200  
      1,687       1,692       5,794       4,936  
Loss on impairment     -       -       (210 )     -  
Gain (loss) on disposal of assets, net     50       (1 )     40       (1 )
Operating income     803       298       954       1,035  
                                 
Other income (expense), net                                
  Interest income     15       7       43       27  
  Interest expense, net of amounts capitalized     (180 )     (151 )     (543 )     (443 )
  Other, net     (8 )     (77 )     (32 )     (79 )
      (173 )     (221 )     (532 )     (495 )
Income from continuing operations before income tax expense     630       77       422       540  
Income tax expense     104       93       96       211  
Income (loss) from continuing operations     526       (16 )     326       329  
Income (loss) from discontinued operations, net of tax     (909 )     (5 )     (994 )     116  
                                 
Net income (loss)     (383 )     (21 )     (668 )     445  
Net income (loss) attributable to noncontrolling interest     (2 )     11       7       34  
Net income (loss) attributable to controlling interest   $ (381 )   $ (32 )   $ (675 )   $ 411  
                                 
Earnings (loss) per share-basic                                
  Earnings (loss) from continuing operations   $ 1.47     $ (0.08 )   $ 0.90     $ 0.92  
  Earnings (loss) from discontinued operations     (2.53 )     (0.02 )     (2.80 )     0.36  
  Earnings (loss) per share   $ (1.06 )   $ (0.10 )   $ (1.90 )   $ 1.28  
                                 
Earnings (loss) per share-diluted                                
  Earnings (loss) from continuing operations   $ 1.47     $ (0.08 )   $ 0.90     $ 0.92  
  Earnings (loss) from discontinued operations     (2.53 )     (0.02 )     (2.80 )     0.36  
  Earnings (loss) per share   $ (1.06 )   $ (0.10 )   $ (1.90 )   $ 1.28  
                                 
Weighted-average shares outstanding                                
  Basic     359       320       354       320  
  Diluted     359       320       354       320  
                                 
                                 
                                 
TRANSOCEAN LTD. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(In millions, except share data)
(Unaudited)
 
    September 30,
2012
    December 31,
2011
 
Assets                 
Cash and cash equivalents   $ 6,001     $ 4,017  
Accounts receivable, net of allowance for doubtful accounts of $28 at September 30, 2012 and December 31, 2011     2,163       2,176  
Materials and supplies, net of allowance for obsolescence of $71 and $59 at September 30, 2012 and December 31, 2011, respectively     597       529  
Deferred income taxes, net     169       142  
Assets held for sale     930       26  
Other current assets     444       646  
    Total current assets     10,304       7,536  
                 
Property and equipment     26,567       24,833  
Property and equipment of consolidated variable interest entities     817       2,252  
Less accumulated depreciation     6,925       6,297  
  Property and equipment, net     20,459       20,788  
Goodwill     2,987       3,217  
Other assets     1,562       3,491  
    Total assets   $ 35,312     $ 35,032  
                 
Liabilities and equity                
Accounts payable   $ 876     $ 880  
Accrued income taxes     257       86  
Debt due within one year     2,701       1,942  
Debt of consolidated variable interest entities due within one year     28       245  
Other current liabilities     2,839       2,375  
    Total current liabilities     6,701       5,528  
                 
Long-term debt     11,211       10,756  
Long-term debt of consolidated variable interest entities     177       593  
Deferred income taxes, net     450       514  
Other long-term liabilities     1,517       1,898  
    Total long-term liabilities     13,355       13,761  
                 
Commitments and contingencies                
Redeemable noncontrolling interest     -       116  
                 
Shares, CHF 15.00 par value, 402,282,355 authorized, 167,617,649 conditionally authorized, and 373,830,649 and 365,135,298 issued at September 30, 2012 and December 31, 2011, respectively; 359,418,883 and 349,805,793 outstanding at September 30, 2012 and December 31, 2011, respectively     5,129       4,982  
Additional paid-in capital     7,496       7,211  
Treasury shares, at cost, 2,863,267 held at September 30, 2012 and December 31, 2011     (240 )     (240 )
Retained earnings     3,399       4,180  
Accumulated other comprehensive loss     (512 )     (496 )
  Total controlling interest shareholders' equity     15,272       15,637  
  Noncontrolling interest     (16 )     (10 )
    Total equity     15,256       15,627  
    Total liabilities and equity   $ 35,312     $ 35,032  
                 
                 
                 
TRANSOCEAN LTD. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(In millions)
(Unaudited)
 
    Three months ended
September 30,
    Nine months ended
September 30,
 
    2012     2011     2012     2011  
                         
Cash flows from operating activities                            
  Net income (loss)   $ (383 )   $ (21 )   $ (668 )   $ 445  
  Adjustments to reconcile to net cash provided by operating activities                                
    Amortization of drilling contract intangibles     (9 )     (12 )     (32 )     (32 )
    Depreciation and amortization     280       281       846       821  
    Depreciation and amortization of assets in discontinued operations     48       80       182       258  
    Share-based compensation expense     24       20       72       74  
    Loss on impairment     -       -       210       -  
    Loss on impairment of assets in discontinued operations     878       7       913       32  
    (Gain) loss on disposal of assets, net     (50 )     1       (40 )     1  
    (Gain) loss on disposal of assets in discontinued operations, net     1       1       (70 )     (175 )
    Amortization of debt issue costs, discounts and premiums, net     17       33       52       95  
    Deferred income taxes     (61 )     (6 )     (104 )     30  
    Other, net     12       79       47       85  
    Changes in deferred revenue, net     (64 )     (36 )     (69 )     7  
    Changes in deferred expenses, net     51       18       30       (66 )
    Changes in operating assets and liabilities     42       47       416       (353 )
Net cash provided by operating activities     786       492       1,785       1,222  
                                 
Cash flows from investing activities                                
  Capital expenditures     (201 )     (124 )     (646 )     (633 )
  Capital expenditures for discontinued operations     (24 )     (13 )     (75 )     (37 )
  Investment in marketable security     -       (199 )     -       (199 )
  Proceeds from disposal of assets, net     178       4       189       12  
  Proceeds from disposal of assets in discontinued operations, net     5       84       196       353  
  Payment for settlement of forward exchange contract     -       (78 )     -       (78 )
  Other, net     7       6       32       (27 )
Net cash used in investing activities     (35 )     (320 )     (304 )     (609 )
                                 
Cash flows from financing activities                                
  Changes in short-term borrowings, net     -       2       (260 )     58  
  Proceeds from debt     1,493       -       1,493       5  
  Repayments of debt     (264 )     (23 )     (584 )     (272 )
  Proceeds from restricted cash investments     106       -       298       -  
  Deposits to restricted cash investments     (42 )     -       (158 )     -  
  Distribution of qualifying additional paid-in capital     -       (254 )     (278 )     (508 )
  Other, net     (7 )     -       (8 )     (4 )
Net cash provided by (used in) financing activities     1,286       (275 )     503       (721 )
                                 
Net increase (decrease) in cash and cash equivalents     2,037       (103 )     1,984       (108 )
Cash and cash equivalents at beginning of period     3,964       3,349       4,017       3,354  
Cash and cash equivalents at end of period   $ 6,001     $ 3,246     $ 6,001     $ 3,246  
                                 
 
 
TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS
 
    Operating Revenues (in millions) (1)
    Three months ended   Nine months ended
September 30,
    September 30,
2012
  June 30,
2012
  September 30,
2011
  2012   2011
Contract Drilling Revenues                              
  High-Specification Floaters:                              
    Ultra Deepwater Floaters   $ 1,213   $ 1,141   $ 1,030   $ 3,446   $ 2,878
    Deepwater Floaters     306     327     185     876     716
    Harsh Environment Floaters     247     264     190     766     522
  Total High-Specification Floaters     1,766     1,732     1,405     5,088     4,116
  Midwater Floaters     424     338     352     1,108     1,129
  High-Specification Jackups     110     93     58     270     119
Total Contract Drilling Revenues - continuing operations     2,300     2,163     1,815     6,466     5,364
                               
Contract Intangible Revenue     10     11     12     32     32
Other Revenues                              
  Client Reimbursable Revenues     46     34     39     123     107
  Integrated Services and Other     -     6     13     6     42
  Drilling Management Services     84     138     112     291     427
Total Other Revenues     130     178     164     420     576
Total Revenue from continuing operations     2,440     2,352     1,991     6,918     5,972
                               
Discontinued operations:                              
  Standard Jackups     245     209     237     654     710
  Other Rigs     7     7     6     21     20
  Client Reimbursable Revenues     6     7     5     18     15
Total discontinued operations     258     223     248     693     745
                               
Total Company   $ 2,698   $ 2,575   $ 2,239   $ 7,611   $ 6,717
                               
    Average Daily Revenue (1)
    Three months ended   Nine months ended
September 30,
    September 30,
2012
  June 30,
 2012
  September 30,
2011
  2012   2011
Continuing operations:                              
  High-Specification Floaters:                              
    Ultra Deepwater Floaters   $ 539,300   $ 537,000   $ 524,800   $ 537,100   $ 504,000
    Deepwater Floaters     372,600     379,200     343,500     370,800     382,400
    Harsh Environment Floaters     439,600     433,200     433,800     449,500     423,100
  Total High-Specification Floaters     486,200     481,600     478,000     485,400     466,800
  Midwater Floaters     284,800     295,800     287,400     285,100     310,600
  High-Specification Jackups     156,700     141,500     115,000     139,900     112,500
Total continuing operations:     395,100     401,000     388,800     396,700     397,200
                               
Discontinued operations                              
  Standard Jackups     92,800     90,800     101,100     91,900     107,000
  Other Rigs     75,000     77,800     73,800     75,400     74,500
Total discontinued operations     92,200     90,300     100,100     91,300     105,700
                               
Total Drilling Fleet   $ 298,300   $ 305,400   $ 289,800   $ 301,500   $ 298,100
                               
(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   Nine months ended
September 30,
    September 30,
2012
  June 30,
2012
  September 30,
2011
  2012   2011
Continuing operations:                    
  High-Specification Floaters:                    
    Ultra Deepwater Floaters   91%   87%   79%   87%   79%
    Deepwater Floaters   61%   59%   37%   55%   43%
    Harsh Environment Floaters   87%   96%   95%   89%   90%
  Total High-Specification Floaters   81%   79%   67%   77%   68%
  Midwater Floaters   65%   52%   55%   58%   56%
  High-Specification Jackups   84%   83%   66%   82%   50%
Total continuing operations   77%   72%   63%   72%   63%
                     
Discontinued Operations:                    
  Standard Jackups   66%   56%   49%   57%   46%
  Other Rigs   100%   100%   100%   99%   60%
Total discontinued operations   67%   57%   50%   58%   46%
                     
Total Drilling Fleet   73%   66%   58%   67%   56%
                     
(2) Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in our fleet.
 
 
     
     
    Revenue Efficiency(3)
    Trailing Five Quarters and Historical Data
                             
    3Q 2012   2Q 2012   1Q 2012   4Q 2011   3Q 2011   FY 2011   FY 2010
                             
Ultra Deepwater   95.8%   92.2%   89.4%   89.5%   86.4%   87.7%   88.6%
Deepwater   93.5%   92.1%   83.2%   88.1%   87.7%   89.4%   90.3%
Harsh Environment Floaters   95.5%   98.1%   97.8%   98.0%   94.4%   97.4%   96.0%
Midwater Floaters   89.7%   87.4%   90.8%   94.2%   90.8%   92.6%   92.5%
High Specification Jackups   97.3%   94.5%   92.5%   93.4%   96.8%   94.8%   94.6%
Total continuing operations   94.3%   92.1%   89.9%   91.3%   88.5%   90.1%   90.8%
                             
Standard Jackups   95.4%   97.4%   97.9%   96.6%   98.3%   97.8%   97.4%
Others   99.1%   99.4%   97.3%   98.6%   99.5%   98.7%   98.4%
Total discontinued operations   95.5%   97.5%   97.9%   96.6%   98.3%   97.8%   97.4%
                             
Total Fleet   94.5%   92.5%   90.6%   91.9%   89.5%   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     Nine months ended  
    September 30,
2012
    June 30,
2012
    September 30,
2011
    September 30,
2012
    September 30,
2011
 
                                         
Income (loss) from continuing operations before income taxes   $ 630     $ (321 )   $ 77     $ 422     $ 540  
  Add back (subtract):                                        
  Litigation matters     8       750       -       758       -  
  Acquisition costs     -       -       5       1       5  
  Gain on disposal of other assets, net     (51 )     -       -       (51 )     -  
  Loss on impairment of goodwill and other assets     -       -       -       210       -  
  Loss on redeemed noncontrolling interest     -       14       -       25       -  
  Loss on forward exchange contract     -       -       78       -       78  
  Gain on sale of equity method investment     -       -       (13 )     -       (13 )
  Other, net     (1 )     -       -       (2 )     6  
Adjusted income from continuing operations before income taxes     586       443       147       1,363       616  
                                         
Income tax (benefit) expense from continuing operations     104       (16 )     93       96       211  
    Add back (subtract):                                        
    Litigation matters     2       -       -       2       -  
    Gain on disposal of other assets     (3 )     -       -       (3 )     -  
    Loss on impairment     -       -       -       30       -  
    Changes in estimates (1)     (14 )     141       7       154       (23 )
    Other, net     -       -       -       -       2  
Adjusted income tax expense from continuing operations (2)   $ 89     $ 125     $ 100     $ 279     $ 190  
                                         
Effective Tax Rate (3)     16.5 %     5.0 %     120.8 %     22.7 %     39.1 %
                                         
Annual Effective Tax Rate (4)     15.2 %     28.2 %     68.0 %     20.5 %     30.8 %
                                         
(1) Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities.  
(2) The three and nine months ended September 30, 2012 includes $(31) 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.  
   
   
   
   
TRANSOCEAN LTD. AND SUBSIDIARIES  
Non-GAAP Financial Measures and Reconciliations  
Adjusted Net Income and Diluted Earnings Per Share  
(in US$ millions, except per share data)  
                               
    YTD     QTR     YTD     QTR     QTR  
Adjusted Net Income   09/30/12     09/30/12     06/30/12     06/30/12     03/31/12  
Net income (loss) attributable to controlling interest, as reported   $ (675 )   $ (381 )   $ (294 )   $ (304 )   $ 10  
  Add back (subtract):                                        
    Litigation matters     756       6       750       750       -  
    Loss on impairment of goodwill and other assets     180       -       180       -       180  
    Gain on disposal of assets, net     (48 )     (48 )     -       -       -  
    Loss on redeemed noncontrolling interest     25       -       25       14       11  
    Loss on impairment of discontinued operations     911       878       33       12       21  
    (Gain) loss on sale of discontinued operations     (70 )     -       (70 )     (72 )     2  
    Loss from discontinued operations     152       30       122       58       64  
    Discrete tax items and other, net     (154 )     14       (168 )     (141 )     (27 )
Net income, as adjusted   $ 1,077     $ 499     $ 578     $ 317     $ 261  
                                         
Diluted Earnings Per Share                                        
Diluted earnings (loss) per share, as reported   $ (1.90 )   $ (1.06 )   $ (0.83 )   $ (0.85 )   $ 0.03  
  Add back (subtract):                                        
    Litigation matters     2.12       0.02       2.12       2.09       -  
    Loss on impairment of goodwill and other assets     0.50       -       0.51       -       0.51  
    Gain on disposal of assets, net     (0.13 )     (0.13 )     -       -       -  
    Loss on redeemed noncontrolling interest     0.07       -       0.07       0.04       0.03  
    Loss on impairment of discontinued operations     2.56       2.43       0.09       0.03       0.06  
    (Gain) loss on sale of discontinued operations     (0.19 )     -       (0.20 )     (0.20 )     0.01  
    Loss from discontinued operations     0.42       0.08       0.34       0.16       0.18  
    Discrete tax items and other, net     (0.44 )     0.03       (0.47 )     (0.39 )     (0.08 )
Diluted earnings per share, as adjusted   $ 3.01     $ 1.37     $ 1.63     $ 0.88     $ 0.74  
                                         
    YTD    QTR    YTD    QTR    YTD    QTR   QTR 
Adjusted Net Income   12/31/11    12/31/11    09/30/11    09/30/11    06/30/11    06/30/11   03/31/11 
Net income (loss) attributable to controlling interest, as reported   $ (5,754 )   $ (6,165 )   $ 411     $ (32 )   $ 443     $ 124   $ 319  
  Add back (subtract):                                                      
    Litigation matters     1,000       1,000       -       -       -       -     -  
    Acquisition costs     22       17       5       5       -       -     -  
    Loss on impairment of goodwill and other assets     5,201       5,201       -       -       -       -     -  
    Gain on disposal of assets, net     (13 )     -       (13 )     (13 )     -       -     -  
    Loss on marketable security     13       13       -       -       -       -     -  
    Loss on forward exchange contract     78       -       78       78       -       -     -  
    Loss on impairment of discontinued operations     34       4       30       5       25       25     -  
    (Gain) loss on sale of discontinued operations     (201 )     (24 )     (177 )     -       (177 )     1     (178 )
    Loss from discontinued operations     86       55       31       -       31       11     20  
    Discrete tax items and other, net     16       (10 )     26       (7 )     33       14     19  
Net income, as adjusted   $ 482     $ 91     $ 391     $ 36     $ 355     $ 175   $ 180  
                                                       
Diluted Earnings Per Share                                                      
Diluted earnings (loss) per share, as reported   $ (17.88 )   $ (18.76 )   $ 1.28     $ (0.10 )   $ 1.38     $ 0.38   $ 0.99  
  Add back (subtract):                                                      
    Litigation matters     3.11       3.04       -       -       -       -     -  
    Acquisition costs     0.07       0.05       0.02       0.02       -       -     -  
    Loss on impairment of goodwill and other assets     16.15       15.83       -       -       -       -     -  
    Gain on disposal of assets, net     (0.04 )     -       (0.04 )     (0.04 )     -       -     -  
    Loss on marketable security     0.04       0.04       -       -       -       -     -  
    Loss on forward exchange contract     0.24       -       0.24       0.24       -       -     -  
    Loss on impairment of discontinued operations     0.11       0.01       0.09       0.02       0.08       0.08     -  
    (Gain) loss on sale of discontinued operations     (0.62 )     (0.07 )     (0.53 )     -       (0.54 )     -     (0.55 )
    Loss from discontinued operations     0.27       0.17       0.09       -       0.10       0.04     0.06  
    Discrete tax items and other, net     0.04       (0.03 )     0.07       (0.03 )     0.09       0.05     0.06  
Diluted earnings per share, as adjusted   $ 1.49     $ 0.28     $ 1.22     $ 0.11     $ 1.11     $ 0.55   $ 0.56  
                         
Note: 2010 has been removed pending restatement for discontinued operations.  
                                                       

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