SOURCE: Transocean Ltd.

March 01, 2013 16:55 ET

Transocean Ltd. Reports Fourth Quarter and Full Year 2012 Results

ZUG, SWITZERLAND--(Marketwire - Mar 1, 2013) -  Transocean Ltd. (NYSE: RIG) (SIX: RIGN)

  • Fourth quarter 2012 revenues were $2.326 billion, compared with $2.431 billion in the third quarter 2012;
  • Operating and maintenance expenses for the fourth quarter were $1.438 billion, compared with $1.321 billion in the third quarter 2012;
  • Fourth quarter 2012 net income attributable to controlling interest was $456 million, which included $126 million of net favorable items. This compares with the third quarter 2012 net loss attributable to controlling interest of $381 million, which included $887 million of net unfavorable items;
  • Fourth quarter Annual Effective Tax Rate(1) from continuing operations was 7.8 percent, compared with 15.2 percent in the third quarter 2012;
  • Fourth quarter net income attributable to controlling interest was $1.26 per diluted share. After adjusting for net favorable items, adjusted earnings from continuing operations were $330 million, or $0.91 per diluted share;
  • Cash flows from operating activities were $923 million in the fourth quarter, compared with $786 million in the third quarter 2012;
  • Revenue efficiency(2) from continuing operations was 94.7 percent in the fourth quarter, compared with 94.9 percent, in the third quarter 2012. Ultra-Deepwater revenue efficiency was 95.5 percent, compared with 95.9 percent in the prior quarter. Total rig utilization(3) from continuing operations was 79 percent in the fourth quarter, compared with 80 percent in the third quarter 2012;
  • New contracts associated with continuing operations totaling $2.0 billion were secured in the Fleet Status Report periods October 17, 2012 through February 14, 2013. Backlog from continuing operations was $28.8 billion at February 14, 2013; and
  • During the fourth quarter of 2012, the company reclassified its drilling management services operations in the U.S. Gulf of Mexico to discontinued operations, reducing other revenues and operating and maintenance expenses in the period by $51 million and $50 million, respectively.

Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $456 million, or $1.26 per diluted share, for the three months ended December 31, 2012. Fourth quarter 2012 results included net favorable items of $126 million, or $0.35 per diluted share. The results compare with a net loss attributable to controlling interest of $6.2 billion, or $18.76 per diluted share, for the three months ended December 31, 2011. Fourth quarter 2011 results included net unfavorable items of $6.3 billion, or $19.02 per diluted share. The net unfavorable items in 2011 were primarily due to a loss on goodwill impairment of $5.2 billion, or $15.83 per diluted share, related to the contract drilling services reporting unit; and $1.0 billion, or $3.04 per diluted share, for estimated loss contingencies associated with the Macondo well incident.

Fourth quarter 2012 net favorable items, after tax, included the following:

  • $101 million, or $0.28 per diluted share, associated with favorable discrete tax items, and
  • $25 million, or $0.07 per diluted share, of income from discontinued operations primarily associated with the sale of the shallow water rigs.

After consideration of these net favorable items, adjusted earnings from continuing operations were $330 million, or $0.91 per diluted share. A reconciliation of the non-GAAP adjusted net income and diluted earnings per share is included in the accompanying schedules.

Revenues from continuing operations for the three months ended December 31, 2012 were $2.326 billion, compared with revenues of $2.431 billion during the preceding three month period. Contract drilling revenues decreased $35 million primarily due to the expected increase in out of service time, partly offset by higher average dayrates. Revenue efficiency from continuing operations was 94.7 percent for the fourth quarter, compared with 94.9 percent in the third quarter 2012. Other revenues decreased $70 million to $51 million for the fourth quarter 2012, compared with $121 million in the prior quarter, primarily due to lower drilling management services activity.

As expected, operating and maintenance expenses from continuing operations increased $117 million to $1.438 billion for the fourth quarter of 2012, compared with $1.321 billion for the prior quarter. Contract drilling expenses increased $173 million primarily due to higher maintenance and shipyard costs associated with rigs undergoing surveys and other projects. Costs associated primarily with the company's drilling management services reporting unit decreased $56 million due to reduced activity.

General and administrative expenses were $65 million for the fourth quarter 2012, compared with $69 million in the previous quarter.

Transocean's fourth quarter Effective Tax Rate(4) from continuing operations was (20.7) percent, compared with 16.5 percent in the third quarter 2012. The decrease in the Effective Tax Rate was due to changes in estimates primarily related to settlements of prior years' tax liabilities. Transocean's Annual Effective Tax Rate from continuing operations for the fourth quarter 2012 was 7.8 percent. This compares with 15.2 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, the foreign exchange effect of the strengthened Norwegian krone versus the U.S. dollar, and rig movements between jurisdictions. Fourth quarter 2012 income tax expense included a favorable adjustment of $37 million, or $0.10 per diluted share, required to decrease the 2012 Annual Effective Tax Rate to 17.8 percent from 20.5 percent for the nine months ended September 30, 2012.

Interest expense, net of amounts capitalized, was $180 million, unchanged from the prior quarter. Capitalized interest for the fourth quarter was $18 million, compared with $12 million in the third quarter 2012. Interest income decreased to $13 million in the fourth quarter, compared with $15 million in the third quarter 2012.

Cash flows from operating activities were $923 million for the fourth quarter, compared with $786 million for the third quarter 2012. Capital expenditures from continuing operations were $657 million for the fourth quarter, compared with $201 million in the third quarter of 2012.

Full Year 2012

For the year ended December 31, 2012, net loss attributable to controlling interest totaled $219 million, or $0.62 per diluted share. Full year results included $1.638 billion, or $4.58 per diluted share, of net unfavorable items as follows:

  • $961 million, or $2.70 per diluted share, loss on impairment of assets included in discontinued operations;
  • $756 million, or $2.11 per diluted share, primarily for estimated loss contingencies associated with the Macondo well incident;
  • $135 million, or $0.38 per diluted share, additional charges associated with the estimated 2011 goodwill impairment of the contract drilling services reporting unit and the 2012 impairment of the intangible assets of ADTI;
  • $66 million, or $0.19 per diluted share, net loss from discontinued operations, offset by;
  • $232 million or $0.67 per diluted share, related to favorable discrete taxes and other items; and
  • $48 million, or $0.13 per diluted share, gain on the sale of two deepwater floaters.

After consideration of these net unfavorable items, adjusted earnings from continuing operations for the full year 2012 were $1.419 billion, or $3.96 per diluted share. A reconciliation of the non-GAAP adjusted net income and diluted earnings per share is included in the accompanying schedules.

During the fourth quarter of 2012, the company reclassified its drilling management services operations in the U.S. Gulf of Mexico to discontinued operations, reducing other revenues and operating and maintenance expenses by $103 million and $112 million, respectively, for the year ended December 31, 2012.

Interest expense, net of amounts capitalized, was $723 million for the full year 2012, compared with $621 million for the full year 2011. Capitalized interest for the full year 2012 was $54 million, compared with $39 million in 2011. Interest income was $56 million for the full year 2012, compared with $44 million in 2011.

For the full year 2012, cash flow from operating activities totaled $2.708 billion, compared with $1.825 billion for 2011.

For the year ended December 31, 2011, net loss attributable to controlling interest totaled $5.754 billion, or $17.88 per diluted share, resulting primarily from the loss on the goodwill impairment associated with the contract drilling services reporting unit of $5.2 billion, or $16.15 per diluted share; and the estimated loss contingencies associated with the Macondo well incident of $1.0 billion, or $3.10 per diluted share.

Full Year 2013 Guidance Summary

The following table is a summary of the company's full year 2013 guidance for key income statement and balance sheet items. This information is based on current expectations and certain management assumptions, and is subject to change. 

   
Item Range
Other Revenues * $400 million - $420 million
Fleet Average Revenue Efficiency Approximately 93 percent
Operating and Maintenance Expenses $5.7 billion - $5.9 billion
Depreciation and Amortization $1.1 billion - $1.2 billion
General and Administrative Expenses $280 million - $300 million
Net Interest Expense ** $540 million - $550 million
Annual Effective Tax Rate Between 18% and 22%
Capital Expenditures Approximately $3.0 billion
Discontinued Operations Net loss of $15 million to $20 million per quarter
   
* Other Revenues includes Drilling Management Services, recharge revenues, and other miscellaneous revenues.
** Net Interest Expense is net of capitalized interest of approximately $90 million and Interest Income of approximately $50 million.

Forward-Looking Statements

Statements included in this news release including, but not limited to, those regarding estimates of Transocean's full year 2013 guidance, goodwill or long-lived asset impairments, 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, March 4, 2013. To participate, dial +1 913-312-0407 and refer to confirmation code 8254413 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 "4Q12 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 3:00 p.m. EST, 9:00 p.m. CET, on March 4, 2013, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 8254413. 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, 82 mobile offshore drilling units consisting of 48 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment drilling rigs), 25 Midwater Floaters and nine High-Specification Jackups. In addition, we have six Ultra-Deepwater Drillships and three High-Specification Jackups under construction.

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

Notes

(1) 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."

(2) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage. Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. See the accompanying schedule entitled "Revenue Efficiency."

(3) Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed as a percentage. See the accompanying schedule entitled "Utilization."

(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  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(In millions, except per share data)  
(Unaudited)  
   
    Three months ended
December 31,
    Year ended
December 31,
 
    2012     2011     2012     2011  
Operating revenues                                
  Contract drilling revenues   $ 2,275     $ 2,011     $ 8,773     $ 7,407  
  Other revenues     51       122       423       620  
      2,326       2,133       9,196       8,027  
Costs and expenses                                
  Operating and maintenance     1,438       2,355       6,106       6,179  
  Depreciation and amortization     278       290       1,123       1,109  
  General and administrative     65       88       282       288  
      1,781       2,733       7,511       7,576  
Loss on impairment     --       (5,201 )     (140 )     (5,201 )
Gain (loss) on disposal of assets, net     (4 )     (10 )     36       (12 )
Operating income     541       (5,811 )     1,581       (4,762 )
                                 
Other income (expense), net                                
  Interest income     13       17       56       44  
  Interest expense, net of amounts capitalized     (180 )     (178 )     (723 )     (621 )
  Gain on retirement of debt     --       --       2       --  
  Other, net     (16 )     (3 )     (50 )     (99 )
      (183 )     (164 )     (715 )     (676 )
Income (loss) from continuing operations before income tax expense     358       (5,975 )     866       (5,438 )
Income tax expense (benefit)     (74 )     119       50       324  
Income (loss) from continuing operations     432       (6,094 )     816       (5,762 )
Income (loss) from discontinued operations, net of tax     25       (28 )     (1,027 )     85  
                                 
Net income (loss)     457       (6,122 )     (211 )     (5,677 )
Net income attributable to noncontrolling interest     1       43       8       77  
Net income (loss) attributable to controlling interest   $ 456     $ (6,165 )   $ (219 )   $ (5,754 )
                                 
Earnings (loss) per share-basic                                
  Earnings (loss) from continuing operations   $ 1.19     $ (18.67 )   $ 2.27     $ (18.14 )
  Earnings (loss) from discontinued operations     0.07       (0.09 )     (2.89 )     0.26  
  Earnings (loss) per share   $ 1.26     $ (18.76 )   $ (0.62 )   $ (17.88 )
                                 
Earnings (loss) per share-diluted                                
  Earnings (loss) from continuing operations   $ 1.19     $ (18.67 )   $ 2.27     $ (18.14 )
  Earnings (loss) from discontinued operations     0.07       (0.09 )     (2.89 )     0.26  
  Earnings (loss) per share   $ 1.26     $ (18.76 )   $ (0.62 )   $ (17.88 )
                                 
Weighted-average shares outstanding                                
  Basic     359       329       356       322  
  Diluted     360       329       356       322  
                                   
                                   
                                   
TRANSOCEAN LTD. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(In millions, except share data)  
(Unaudited)  
   
    December 31,  
    2012     2011  
                 
Assets                
Cash and cash equivalents   $ 5,134     $ 4,017  
Accounts receivable, net                
  Trade     1,940       2,049  
  Other     260       127  
Materials and supplies, net     610       529  
Assets held for sale     179       26  
Deferred income taxes, net     142       142  
Other current assets     382       646  
      Total current assets     8,647       7,536  
                 
Property and equipment     26,967       24,833  
Property and equipment of consolidated variable interest entities     1,092       2,252  
Less accumulated depreciation     7,179       6,297  
    Property and equipment, net     20,880       20,788  
Goodwill     2,987       3,217  
Other assets     1,741       3,491  
      Total assets   $ 34,255     $ 35,032  
                 
Liabilities and equity                
Accounts payable   $ 1,047     $ 880  
Accrued income taxes     116       86  
Debt due within one year     1,339       1,942  
Debt of consolidated variable interest entities due within one year     28       245  
Other current liabilities     2,933       2,375  
      Total current liabilities     5,463       5,528  
                 
Long-term debt     10,929       10,756  
Long-term debt of consolidated variable interest entities     163       593  
Deferred income taxes, net     366       487  
Other long-term liabilities     1,604       1,925  
      Total long-term liabilities     13,062       13,761  
                 
Commitments and contingencies                
Redeemable noncontrolling interest     --       116  
                 
Shares, CHF 15.00 par value, 402,282,355 authorized, 167,617,649 conditionally authorized at December 31, 2012 and 2011; 373,830,649 and 365,135,298 issued at December 31, 2012 and 2011, respectively; and 359,505,251 and 349,805,793 outstanding at December 31, 2012 and 2011, respectively     5,130       4,982  
Additional paid-in capital     7,521       7,211  
Treasury shares, at cost, 2,863,267 held at December 31, 2012 and 2011     (240 )     (240 )
Retained earnings     3,855       4,180  
Accumulated other comprehensive loss     (521 )     (496 )
    Total controlling interest shareholders' equity     15,745       15,637  
    Noncontrolling interest     (15 )     (10 )
      Total equity     15,730       15,627  
      Total liabilities and equity   $ 34,255     $ 35,032  
                       
                       
                       
TRANSOCEAN LTD. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In millions)  
(Unaudited)  
   
    Three months ended
December 31,
    Twelve months ended
December 31,
 
    2012     2011     2012     2011  
                                 
Cash flows from operating activities                                
  Net income (loss)   $ 457     $ (6,122 )   $ (211 )   $ (5,677 )
  Adjustments to reconcile to net cash provided by operating activities                                
    Amortization of drilling contract intangibles     (10 )     (13 )     (42 )     (45 )
    Depreciation and amortization     278       290       1,123       1,109  
    Depreciation and amortization of assets in discontinued operations     --       82       183       342  
    Share-based compensation expense     25       21       97       95  
    Loss on impairment     --       5,201       140       5,201  
    Loss on impairment of assets in discontinued operations     3       6       986       38  
    (Gain) loss on disposal of assets, net     4       11       (36 )     12  
    Gain on disposal of assets in discontinued operations, net     (12 )     (8 )     (82 )     (183 )
    Amortization of debt issue costs, discounts and premiums, net     16       30       68       125  
    Deferred income taxes     (29 )     (92 )     (133 )     (62 )
    Other, net     25       59       72       144  
    Changes in deferred revenue, net     15       (23 )     (54 )     (16 )
    Changes in deferred expenses, net     55       5       85       (61 )
    Changes in operating assets and liabilities     96       1,156       512       803  
Net cash provided by operating activities     923       603       2,708       1,825  
                                 
Cash flows from investing activities                                
  Capital expenditures     (657 )     (341 )     (1,303 )     (974 )
  Capital expenditures for discontinued operations     (31 )     (9 )     (106 )     (46 )
  Investment in business combination, net of cash acquired     --       (1,047 )     --       (1,246 )
  Proceeds from disposal of assets, net     2       2       191       14  
  Proceeds from disposal of assets in discontinued operations, net     593       94       789       447  
  Payment for settlement of forward exchange contract     --       --       --       (78 )
  Other, net     8       14       40       (13 )
Net cash used in investing activities     (85 )     (1,287 )     (389 )     (1,896 )
                                 
Cash flows from financing activities                                
  Changes in short-term borrowings, net     --       (146 )     (260 )     (88 )
  Proceeds from debt     --       2,934       1,493       2,939  
  Repayments of debt     (1,698 )     (2,137 )     (2,282 )     (2,409 )
  Proceeds from restricted cash investments     13       479       311       479  
  Deposits to restricted cash investments     (9 )     (523 )     (167 )     (523 )
  Proceeds from share issuance, net     --       1,211       --       1,211  
  Distribution of qualifying additional paid-in capital     --       (255 )     (278 )     (763 )
  Other, net     (11 )     (108 )     (19 )     (112 )
Net cash provided by (used in) financing activities     (1,705 )     1,455       (1,202 )     734  
                                 
Net increase (decrease) in cash and cash equivalents     (867 )     771       1,117       663  
Cash and cash equivalents at beginning of period     6,001       3,246       4,017       3,354  
Cash and cash equivalents at end of period   $ 5,134     $ 4,017     $ 5,134     $ 4,017  
                                 
                                 
                                 
TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS
 
    Operating Revenues (in millions)
    Three months ended   Years ended
December 31,
    December
31, 2012
  September
 30, 2012
  December
 31, 2011
  2012   2011
Contract Drilling Revenues                              
  High-Specification Floaters:                              
    Ultra Deepwater Floaters   $ 1,198   $ 1,213   $ 1,066   $ 4,643   $ 3,945
    Deepwater Floaters     275     306     256     1,152     969
    Harsh Environment Floaters     220     247     285     985     806
  Total High-Specification Floaters     1,693     1,766     1,607     6,780     5,720
  Midwater Floaters     464     424     333     1,573     1,462
  High-Specification Jackups     108     110     58     378     176
Total Contract Drilling Revenues - continuing operations     2,265     2,300     1,998     8,731     7,358
                               
Contract Intangible Revenue     10     10     13     42     45
Other Revenues                              
  Client Reimbursable Revenues     40     46     36     162     142
  Integrated Services and Other     3     -     13     10     53
  Drilling Management Services     8     75     73     251     429
Total Other Revenues     51     121     122     423     624
Total Revenue from continuing operations   $ 2,326   $ 2,431   $ 2,133   $ 9,196   $ 8,027
                               
                               
    Average Daily Revenue (1)
    Three months ended   Years ended
December 31,
    December
 31, 2012
  September
30, 2012
  December
31, 2011
  2012   2011
Continuing operations:                              
  High-Specification Floaters:                              
    Ultra Deepwater Floaters   $ 514,300   $ 515,000   $ 490,200   $ 500,300   $ 461,000
    Deepwater Floaters     337,100     356,300     315,200     338,200     340,000
    Harsh Environment Floaters     476,400     421,000     463,000     444,500     428,400
  Total High-Specification Floaters     469,300     464,600     446,100     455,000     430,400
  Midwater Floaters     280,300     264,500     264,800     262,200     286,400
  High-Specification Jackups     162,400     154,600     107,300     141,300     108,500
Total Drilling Fleet:   $ 382,000   $ 376,200   $ 369,900   $ 370,300   $ 367,600
     
(1)   Average daily revenue is defined as contract drilling revenues earned per operating day. An operating day is defined as a calendar day during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations.
     
     
   
TRANSOCEAN LTD. AND SUBSIDIARIES  
FLEET OPERATING STATISTICS (continued)  
   
    Utilization (2)  
    Three months ended     Years ended
December 31,
 
    December
31, 2012
    September
30, 2012
    December
 31, 2011
    2012     2011  
Continuing operations:                              
  High-Specification Floaters:                              
    Ultra Deepwater Floaters   94 %   95 %   88 %   94 %   88 %
    Deepwater Floaters   64 %   63 %   55 %   61 %   49 %
    Harsh Environment Floaters   72 %   91 %   96 %   87 %   94 %
  Total High-Specification Floaters   82 %   85 %   78 %   83 %   76 %
  Midwater Floaters   72 %   70 %   57 %   66 %   59 %
  High-Specification Jackups   81 %   86 %   74 %   84 %   57 %
Total Drilling Fleet   79 %   80 %   72 %   78 %   69 %
     
(2)   Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed as a percentage.
     
     
       Revenue Efficiency(3)  
       Trailing Five Quarters and Historical Data  
                                                 
    4Q 2012     3Q 2012     2Q 2012     1Q 2012     4Q 2011    
FY 2012
    FY 2011     FY 2010  
Ultra Deepwater   95.5 %   95.9 %   92.4 %   89.0 %   89.6 %   93.2 %   87.9 %   89.0 %
Deepwater   90.9 %   96.1 %   94.5 %   83.1 %   89.7 %   91.4 %   90.7 %   91.5 %
Harsh Environment Floaters   97.3 %   95.4 %   97.9 %   97.8 %   98.0 %   97.1 %   97.4 %   96.0 %
Midwater Floaters   93.9 %   90.4 %   88.2 %   90.6 %   95.4 %   90.9 %   93.4 %   92.8 %
High Specification Jackups   95.2 %   97.2 %   94.3 %   92.1 %   93.4 %   95.0 %   94.8 %   94.7 %
Total Fleet   94.7 %   94.9 %   92.7 %   89.6 %   91.8 %   93.0 %   90.5 %   91.2 %
                                                 
(3)   Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation for the measurement period, expressed as a percentage. Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions.
     
     
   
TRANSOCEAN LTD. AND SUBSIDIARIES  
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS  
(In US$ millions, except percentages)  
                               
    Three months ended     Years ended  
    December
 31, 2012
    September
 30, 2012
    December
 31, 2011
    December
 31, 2012
    December
 31, 2011
 
                                         
Income (loss) from continuing operations before income taxes   $ 358     $ 638     $ (5,975 )   $ 866     $ (5,438 )
  Add back (subtract):                                        
  Litigation matters     --       8       1,000       758       1,000  
  Acquisition costs     --       --       17       1       22  
  Gain on disposal of other assets, net     --       (51 )     --       (51 )     --  
  Loss on impairment of goodwill and other assets     --       --       5,201       140       5,201  
  Loss on redeemed noncontrolling interest     --       --       --       25       --  
  Loss on forward exchange contract     --       --       --       --       78  
  Loss on marketable security     --       --       13       --       13  
  Gain on retirement of debt     --       (2 )     --       (2 )     --  
  Other, net     --       --       --       --       6  
Adjusted income from continuing operations before income taxes     358       593       256       1,737       882  
                                         
Income tax (benefit) expense from continuing operations     (74 )     105       119       50       324  
    Add back (subtract):                                        
    Litigation matters     --       2       --       2       --  
    Gain on disposal of other assets, net     --       (3 )     --       (3 )     --  
    Loss on impairment of goodwill and other assets     --       --       --       5       --  
    Changes in estimates (1)     102       (14 )     7       256       (14 )
    Other, net     --       --       --       --       2  
Adjusted income tax expense from continuing operations (2)   $ 28     $ 90     $ 126     $ 310     $ 312  
                                         
Effective Tax Rate (3)     -20.7 %     16.5 %     -2.0 %     5.8 %     -6.0 %
                                         
Annual Effective Tax Rate (4)     7.8 %     15.2 %     49.2 %     17.8 %     35.4 %
                                         
(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 and year ended December 31, 2012 includes $(37) 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     QTD     YTD     QTD     YTD     QTD     QTD  
  12/31/
12
    12/31/
12
    09/30/
12
    09/30/
12
    06/30/
12
    06/30/
12
    03/31/
12
 
Adjusted Net Income                                                      
Net income (loss) attributable to controlling interest, as reported $ (219 )   $ 456     $ (675 )   $ (381 )   $ (294 )   $ (304 )   $ 10  
  Add back (subtract):                                                      
    Litigation matters   756       -       756       6       750       750       -  
    Loss on impairment of goodwill and other assets   135       -       135       -       135       -       135  
    Gain on disposal of assets, net   (48 )     -       (48 )     (48 )     -       -       -  
    Gain on retirement of debt   (2 )     -       (2 )     (2 )     -       -       -  
    Loss on redeemed noncontrolling interest   25       -       25       -       25       14       11  
    Loss on impairment of discontinued operations   961       2       959       881       78       12       66  
    (Gain) loss on sale of discontinued operations   (69 )     (1 )     (68 )     2       (70 )     (72 )     2  
    (Gain) loss from discontinued operations   135       (26 )     161       33       128       59       69  
    Discrete tax items and other, net   (255 )     (101 )     (154 )     15       (169 )     (141 )     (28 )
    Net income, as adjusted $ 1,419     $ 330     $ 1,089     $ 506     $ 583     $ 318     $ 265  
                                                       
Diluted Earnings Per Share:                                                      
Diluted earnings (loss) per share, as reported $ (0.62 )   $ 1.26     $ (1.90 )   $ (1.06 )   $ (0.84 )   $ (0.86 )   $ 0.03  
  Add back (subtract):                                                      
    Litigation matters   2.11       -       2.12       0.02       2.12       2.11       -  
    Loss on impairment of goodwill and other assets   0.38       -       0.38       -       0.38       -       0.38  
    Gain on disposal of assets, net   (0.13 )     -       (0.13 )     (0.13 )     -       -       -  
    Gain on retirement of debt   (0.01 )     -       (0.01 )     (0.01 )     -       -       -  
    Loss on redeemed noncontrolling interest   0.07       -       0.07       -       0.07       0.04       0.03  
    Loss on impairment of discontinued operations   2.70       -       2.70       2.45       0.23       0.03       0.19  
    (Gain) loss on sale of discontinued operations   (0.19 )     -       (0.19 )     0.01       (0.20 )     (0.20 )     0.01  
    (Gain) loss from discontinued operations   0.38       (0.07 )     0.45       0.09       0.36       0.17       0.19  
    Discrete tax items and other, net   (0.73 )     (0.28 )     (0.44 )     0.03       (0.48 )     (0.40 )     (0.08 )
Diluted earnings per share, as adjusted $ 3.96     $ 0.91     $ 3.05     $ 1.40     $ 1.64     $ 0.89     $ 0.75  
                                                       
                                                       
  YTD     QTD     YTD     QTD     YTD     QTD     QTD  
  12/31/
11
    12/31/
11
    09/30/
11
    09/30/
11
    06/30/
11
    06/30/
11
    03/31/
11
 
Adjusted Net Income                                                      
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       -       -       -       -       -  
    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   (214 )     (24 )     (190 )     (14 )     (176 )     2       (178 )
    Loss from discontinued operations   95       48       47       11       36       10       26  
    Discrete tax items and other, net   19       (8 )     27       (6 )     33       13       20  
    Net income, as adjusted $ 494     $ 86     $ 408     $ 47     $ 361     $ 174     $ 187  
                                                       
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   3.10       3.04       -       -       -       -       -  
    Acquisition costs   0.07       0.05       0.02       0.02       -       -       -  
    Loss on impairment of goodwill and other assets   16.15       15.83       -       -       -       -       -  
    Loss on marketable security   0.04       0.04       -       -       -       -       -  
    Loss on forward exchange contract   0.24       -       0.26       0.25       -       -       -  
    Loss on impairment of discontinued operations   0.11       0.01       0.11       0.02       0.09       0.08       -  
    (Gain) loss on sale of discontinued operations   (0.66 )     (0.07 )     (0.62 )     (0.04 )     (0.56 )     0.01       (0.56 )
    Loss from discontinued operations   0.29       0.15       0.16       0.03       0.11       0.03       0.08  
    Discrete tax items and other, net   0.06       (0.03 )     0.06       (0.03 )     0.10       0.04       0.07  
Diluted earnings per share, as adjusted $ 1.52     $ 0.26     $ 1.27     $ 0.15     $ 1.12     $ 0.54     $ 0.58