SOURCE: Transocean Ltd.

May 04, 2011 16:15 ET

Transocean Ltd. Reports First Quarter 2011 Results

ZUG, SWITZERLAND--(Marketwire - May 4, 2011) - Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $310 million, or $0.96 per diluted share, for the three months ended March 31, 2011. The results compare to net income attributable to controlling interest of $677 million, or $2.09 per diluted share for the three months ended March 31, 2010.

First quarter 2011 results included the following items, after tax, that resulted in a net positive impact of approximately $139 million, or $0.43 per diluted share:

--  $176 million of income from discontinued operations, nearly all of
    which is from the gain on the sale of the Trident 20,
--  $9 million from the gain on the sale of the Transocean Mercury,
--  $8 million of net charges related to litigation matters not associated
    with the Macondo well incident, and
--  $38 million of net charges primarily related to discrete tax items.

First quarter 2011 results also included expenses associated with the Macondo well incident of $23 million, $19 million after tax, or $0.06 per diluted share. These expenses were primarily related to increased insurance premiums and legal costs.

Operations Quarterly Review

Revenues for the three months ended March 31, 2011 were $2.144 billion, compared to revenues of $2.127 billion during the three months ended December 31, 2010. First quarter contract drilling revenues were impacted by lower utilization and revenue efficiency. Our Deepwater and Midwater Floater fleets experienced lower utilization due to the stacking of rigs, as well as increased shipyard time related to contract preparation, special periodic surveys and major maintenance projects. Compliance with new well control equipment certification requirements, higher standards for equipment condition and capacity constraints on our vendors contributed to reduced revenue efficiency among our Ultra-Deepwater and Deepwater Floaters. Partially offsetting lower contract drilling revenue was additional revenue from two newbuild rigs commencing operations. Other revenues increased primarily from additional drilling management services activity.

Operating and maintenance expenses totaled $1.359 billion for the first quarter 2011, up slightly from $1.339 billion for the prior quarter. The change was due to increased drilling management services activity, which was partially offset by reduced rig-related maintenance costs.

Depreciation and amortization expense was $354 million in the first quarter 2011 compared to $381 million in the prior quarter. The $27 million decrease was primarily due to the reduced carrying amounts of our Standard Jackups resulting from the approximately $1 billion asset impairment recognized on that asset group during the fourth quarter 2010.

Liquidity and Interest Expense

Interest expense, net of amounts capitalized for the first quarter 2011, was $145 million, compared to $152 million in the fourth quarter 2010.

Cash flow from operating activities decreased to $390 million for the first quarter 2011 compared to $796 million for the fourth quarter 2010. The decline in cash flow from operations resulted primarily from an increase in working capital.

Effective Tax Rate

Transocean's Annual Effective Tax Rate(1) for the first quarter 2011, which excludes various discrete items, was 19.3 percent. The Effective Tax Rate(2) for the first quarter was 33.1 percent, primarily reflecting the impact of discrete items resulting from changes in estimates.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on May 5, 2011. To participate, dial +1 719-325-2234 and refer to confirmation code 8570996 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 "1Q11 Charts," has been posted to Transocean's website and can also be found by selecting "Investor Relations/Quarterly Toolkit." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, "RIG."

A telephonic replay of the conference call should be available after 1:00 p.m. EDT, 7:00 p.m. CEST, on May 5, 2011, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 8570996. 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 the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 137 mobile offshore drilling units as well as one ultra-deepwater drillship and three high-specification jackups 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 47 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 25 Midwater Floaters, nine High-Specification Jackups, 53 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 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."

(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."

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



                    TRANSOCEAN LTD. AND SUBSIDIARIIES
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In millions, except per share data)
                                (Unaudited)



                                                     Three months ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
                                                              (As adjusted)
Operating revenues
  Contract drilling revenues                      $     1,950  $     2,425
  Contract drilling intangible revenues                    10           33
  Other revenues                                          184          121
                                                  -----------  -----------
                                                        2,144        2,579
                                                  -----------  -----------
Costs and expenses
  Operating and maintenance                             1,359        1,186
  Depreciation and amortization                           354          374
  General and administrative                               67           63
                                                  -----------  -----------
                                                        1,780        1,623
                                                  -----------  -----------
Gain (loss) on disposal of assets, net                      8          (14)
                                                  -----------  -----------
Operating income                                          372          942
                                                  -----------  -----------

Other income (expense), net
  Interest income                                          15            5
  Interest expense, net of amounts capitalized           (145)        (132)
  Other, net                                                3           15
                                                  -----------  -----------
                                                         (127)        (112)
                                                  -----------  -----------

Income from continuing operations before income
 tax expense                                              245          830
Income tax expense                                         81          147
                                                  -----------  -----------
Income from continuing operations                         164          683
Income from discontinued operations, net of tax           176            2
                                                  -----------  -----------

Net income                                                340          685
Net income attributable to noncontrolling
 interest                                                  30            8
                                                  -----------  -----------

Net income attributable to controlling interest   $       310  $       677
                                                  ===========  ===========

Earnings per share-basic
  Earnings from continuing operations             $      0.42  $      2.09
  Earnings from discontinued operations                  0.54         0.01
                                                  -----------  -----------
  Earnings per share                                     0.96         2.10
                                                  ===========  ===========

Earnings per share-diluted
  Earnings from continuing operations             $      0.42  $      2.08
  Earnings from discontinued operations                  0.54         0.01
                                                  -----------  -----------
  Earnings per share                                     0.96         2.09
                                                  ===========  ===========

Weighted-average shares outstanding
  Basic                                                   319          321
  Diluted                                                 320          322




                     TRANSOCEAN LTD. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In millions, except share data)
                                (Unaudited)



                                                   March 31,   December 31,
                                                     2011         2010
                                                  -----------  -----------
                                                              (As adjusted)
Assets
Cash and cash equivalents                         $     3,812  $     3,394
Accounts receivable, net of allowance for
 doubtful accounts of $33 and $38 at March 31,
 2011 and December 31, 2010, respectively               2,161        1,978
Materials and supplies, net of allowance for
 obsolescence of $70 at March 31, 2011 and
 December 31, 2010                                        541          514
Deferred income taxes, net                                116          115
Assets held for sale                                       77           --
Other current assets                                      197          194
                                                  -----------  -----------
    Total current assets                                6,904        6,195
                                                  -----------  -----------

Property and equipment                                 26,819       26,721
Property and equipment of consolidated variable
 interest entities                                      2,241        2,214
Less accumulated depreciation                           7,887        7,616
                                                  -----------  -----------
  Property and equipment, net                          21,173       21,319
                                                  -----------  -----------
Goodwill                                                8,132        8,132
Other assets                                            1,001        1,165
                                                  -----------  -----------
    Total assets                                  $    37,210  $    36,811
                                                  ===========  ===========

Liabilities and equity
Accounts payable                                  $       808  $       832
Accrued income taxes                                       67          109
Debt due within one year                                1,965        1,917
Debt of consolidated variable interest entities
 due within one year                                       95           95
Other current liabilities                                 906          883
                                                  -----------  -----------
    Total current liabilities                           3,841        3,836
                                                  -----------  -----------

Long-term debt                                          8,361        8,354
Long-term debt of consolidated variable interest
 entities                                                 820          855
Deferred income taxes, net                                586          575
Other long-term liabilities                             1,840        1,791
                                                  -----------  -----------
    Total long-term liabilities                        11,607       11,575
                                                  -----------  -----------

Commitments and contingencies
Redeemable noncontrolling interest                         57           25

Shares, CHF 15.00 par value, 335,235,298
 authorized, 167,617,649 conditionally
 authorized, 335,235,298 issued at March 31, 2011
 and December 31, 2010; 319,538,901 and
 319,080,678 outstanding at March 31, 2011 and
 December 31, 2010, respectively                        4,488        4,482
Additional paid-in capital                              7,518        7,504
Treasury shares, at cost, 2,863,267 held at
 March 31, 2011 and December 31, 2010                    (240)        (240)
Retained earnings                                      10,279        9,969
Accumulated other comprehensive loss                     (335)        (332)
                                                  -----------  -----------
   Total controlling interest shareholders'
    equity                                             21,710       21,383
                                                  -----------  -----------
   Noncontrolling interest                                 (5)          (8)
                                                  -----------  -----------
    Total equity                                       21,705       21,375
                                                  -----------  -----------
    Total liabilities and equity                  $    37,210  $    36,811
                                                  ===========  ===========




                     TRANSOCEAN LTD. AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In millions)
                               (Unaudited)



                                                     Three months ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------
                                                              (As adjusted)
Cash flows from operating activities
  Net income                                      $       340  $       685
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Amortization of drilling contract
     intangibles                                          (10)         (33)
    Depreciation and amortization                         354          374
    Share-based compensation expense                       27           35
    Gain on disposal of discontinued operations          (173)          --
    (Gain) loss on disposal of assets, net                 (8)          14
    Amortization of debt issue costs, discounts
     and premiums, net                                     26           49
    Deferred income taxes                                  11          (22)
    Other, net                                             (3)          31
    Deferred revenue, net                                  46          151
    Deferred expenses, net                                (36)         (14)
    Changes in operating assets and liabilities          (184)         (98)
                                                  -----------  -----------
Net cash provided by operating activities                 390        1,172
                                                  -----------  -----------

Cash flows from investing activities
  Capital expenditures                                   (240)        (369)
  Proceeds from disposal of assets, net                    13           41
  Proceeds from disposal of discontinued
   operations                                             259           --
  Other, net                                               (6)           5
                                                  -----------  -----------
Net cash provided by (used in) investing
 activities                                                26         (323)
                                                  -----------  -----------

Cash flows from financing activities
  Change in short-term borrowings, net                     51         (131)
  Proceeds from debt                                        5           54
  Repayments of debt                                      (47)        (253)
  Purchases of shares held in treasury                     --          (60)
  Other, net                                               (7)          (3)
                                                  -----------  -----------
Net cash provided by (used in) financing
 activities                                                 2         (393)
                                                  -----------  -----------

Net increase in cash and cash equivalents                 418          456
                                                  -----------  -----------
Cash and cash equivalents at beginning of period        3,394        1,130
                                                  -----------  -----------
Cash and cash equivalents at end of period        $     3,812  $     1,586
                                                  ===========  ===========




                              TRANSOCEAN LTD.
                        FLEET OPERATING STATISTICS



                                      Operating Revenues ($ Millions) (1)
                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                      March 31,   December 31,  March 31,
                                        2011         2010         2010
                                     -----------  -----------  -----------
Contract Drilling Revenues
  High-Specification Floaters:
    Ultra Deepwater Floaters         $       844  $       740  $       901
    Deepwater Floaters                       290          339          390
    Harsh Environment Floaters               150          155          176
  Total High-Specification Floaters        1,284        1,234        1,467
  Midwater Floaters                          400          477          522
  High-Specification Jackups                  31           33           77
  Standard Jackups                           229          259          352
  Other Rigs                                   6            6            7
Subtotal                                   1,950        2,009        2,425
Contract Intangible Revenue                   10           13           33
Other Revenues
  Client Reimbursable Revenues                37           34           40
  Integrated Services and Other               15           15           30
  Drilling Management Services               132           56           51
Subtotal                                     184          105          121
Total Company                        $     2,144  $     2,127  $     2,579


                                           Average Daily Revenue  (1)
                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                      March 31,   December 31,  March 31,
                                        2011         2010         2010
                                     -----------  -----------  -----------
  High-Specification Floaters:
    Ultra Deepwater Floaters         $   467,700  $   435,900  $   486,000
    Deepwater Floaters               $   395,900  $   395,600  $   383,800
    Harsh Environment Floaters       $   402,400  $   366,800  $   400,100
  Total High-Specification Floaters  $   441,300  $   414,500  $   443,200
  Midwater Floaters                  $   313,000  $   298,500  $   331,600
  High-Specification Jackups         $   106,200  $   129,400  $   162,600
  Standard Jackups                   $   109,200  $   110,600  $   133,100
  Other Rigs                         $    73,400  $    73,000  $    72,700
Total Drilling Fleet                 $   292,600  $   276,900  $   299,600


                                                 Utilization (1)
                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                      March 31,   December 31,  March 31,
                                        2011         2010         2010
                                     -----------  -----------  -----------
  High-Specification Floaters:
    Ultra Deepwater Floaters                  77%          76%          88%
    Deepwater Floaters                        51%          58%          71%
    Harsh Environment Floaters                83%          92%          98%
  Total High-Specification Floaters           69%          71%          83%
  Midwater Floaters                           60%          68%          67%
  High-Specification Jackups                  40%          31%          59%
  Standard Jackups                            43%          46%          53%
  Other Rigs                                  49%          48%          50%
Total Drilling Fleet                          55%          58%          66%




                     Transocean Ltd. and Subsidiaries
                 Supplemental Effective Tax Rate Analysis
                            (In US$ millions)

                                     -------------------------------------
                                               Three months ended
                                     -------------------------------------
                                       Mar 31,      Dec 31,      Mar 31,
                                         2011         2010         2010
                                     -----------  -----------  -----------
                                                 (As adjusted)(As adjusted)

Income from continuing operations
 before income taxes                         245         (836)         830
  Add back (subtract):
    Litigation matters                         8            1            -
    (Gain) loss on disposal of other
     assets, net                              (9)           -           14
    Loss on impairment of other
     assets, net                               -        1,010            -
    (Gain) loss on retirement of
     debt                                      -           13           (2)
    Other, net                                 5           (8)           5
                                     -----------  -----------  -----------
Adjusted income from continuing
 operations before income taxes              249          180          847


Income tax expense from continuing
 operations                                   81          (32)         147
  Add back (subtract):
    Changes in estimates (1)                 (35)          (8)         (17)
    Other, net                                 2            -           (1)
                                     -----------  -----------  -----------
Adjusted income tax expense from
 continuing operations (2)                    48          (40)         129
                                     -----------  -----------  -----------


Effective Tax Rate (3)                      33.1%         3.8%        17.7%

Annual Effective Tax Rate (4)               19.3%       -22.1%        15.2%


1) Our estimates change as we file tax returns, settle disputes with tax
   authorities or become aware of other events and include changes in
   (a) deferred taxes, (b) valuation allowances on deferred taxes and
   (c) other tax liabilities.
2) The three months ended December 31, 2010 includes ($65) 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.