Transocean Ltd. Reports Third Quarter 2010 Results
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Transocean Ltd. /
Transocean Ltd. Reports Third Quarter 2010 Results
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ZUG, SWITZERLAND--(Marketwire - November 3, 2010) - Transocean Ltd. (NYSE: RIG)
(SIX: RIGN) today reported net income attributable to controlling interest for
the three months ended September 30, 2010 of $368 million, or $1.15 per diluted
share, on revenues of $2.309 billion. The results compare to net income
attributable to controlling interest of $710 million, or $2.19 per diluted
share, on revenues of $2.823 billion, for the three months ended September
30, 2009.
Third quarter 2010 results included increased expenses associated with the
Macondo well incident of $27 million, or $22 million after tax, calculated using
our Annual Effective Tax Rate. These expenses include legal costs, internal
investigation costs, professional fees and increased insurance premiums.
In addition, third quarter 2010 results were adversely impacted by $43 million
of after tax items, as follows:
-- A $22 million loss on retirement of debt associated with
repurchases of a portion of our convertible senior notes,
-- $14 million of additional charges related to legal matters
not related to the Macondo well incident, and
-- $7 million related to discrete tax items.
Third quarter 2009 results were adversely impacted by certain net charges, after
tax, totaling $148 million, or $0.46 per diluted share. These charges were
related to various litigation matters, the impairment of intangible assets, the
retirement of debt and certain merger-related costs, partially offset by income
related to discrete tax items and gains on settlements of certain tax matters.
Operations Quarterly Review
Revenues for the three months ended September 30, 2010 were $2.309 billion
compared to $2.505 billion for the three months ended June 30, 2010. The $196
million decline was primarily due to $223 million resulting from the U.S. Gulf
of Mexico moratorium, $34 million resulting from the stacking of rigs and $24
million of other minor variances, partially offset by increases of $85 million
resulting from reduced shipyard activity.
Operating and maintenance expenses totaled $1.213 billion for the third quarter
2010, down approximately 11 percent compared to $1.358 billion for the prior
quarter. The $145 million reduction in operating and maintenance costs was
primarily due to $96 million resulting from reduced activity related to the U.S.
Gulf of Mexico drilling moratorium, a $65 million charge in the prior quarter
for insurance deductibles from the Macondo well incident and $24 million in cost
reductions primarily from the stacking of rigs. These cost reductions were
partially offset by $27 million of increased costs associated with the Macondo
well incident and $17 million resulting from increased maintenance costs
associated with our drilling operations.
General and administrative expenses were $59 million for the third quarter
2010, compared to $58 million in the second quarter 2010.
Liquidity and Interest Expense
Interest expense, net of amounts capitalized in the third quarter 2010, totaled
$142 million, compared to $141 million in the prior quarter. As of September
30, 2010, total debt was $12.840 billion, compared to $11.426 billion as of June
30, 2010, an increase of $1.414 billion. The quarter-to-quarter increase in
total debt primarily reflects proceeds from a new offering of senior notes, net
of repurchases of our convertible senior notes.
Cash flow from operating activities totaled $709 million for the third quarter
of 2010, down from $1.269 billion for the second quarter of 2010.
As of September 30, 2010, cash and cash equivalents were $4.636 billion,
compared to $2.888 billion at June 30, 2010. The increase was principally due to
net proceeds from our issuance of the senior notes and cash flows from
operations, partially offset by our repurchases of convertible senior notes and
capital expenditures.
Effective Tax Rate
Transocean's reported Effective Tax Rate(1) for the third quarter 2010 was 23.8
percent. The higher Effective Tax Rate was due to the redeployment of certain
rigs between various tax jurisdictions and included $7 million of discrete tax
items. Excluding these discrete items the Annual Effective Tax Rate(2) for the
third quarter was 20.8 percent.
Macondo Well Incident
Our Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission includes updated information on the Macondo well incident. To view
the Form 10-Q filing, please use the following
link:http://www.deepwater.com/fw/main/SEC-Filings-57.html.
Conference Call Information
Transocean will conduct a teleconference call at 10:00 a.m. EDT (3:00 p.m. CET)
on Thursday, November 4, 2010. Individuals who wish to participate in the
teleconference call should dial +1 719-325-2298 and refer to confirmation code
4130334 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 atwww.deepwater.com and selecting "Investor Relations." A file
containing four charts to be discussed during the conference call, titled "3Q10
Charts," has been posted to Transocean's website and can be found by selecting
"Investor Relations/Quarterly Toolkit." The conference call may also be accessed
via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York
Stock Exchange trading symbol, "RIG."
A telephonic replay of the conference call should be available after 1:00 p.m.
EDT (6:00 p.m. CET) on November 4, 2010, and can be accessed by dialing
+1 719-457-0820 or +1 888-203-1112 and referring to the passcode 4130334. Also,
a replay will be available through the Internet and can be accessed by visiting
either of the above-referenced Worldwide Web addresses. Both replay options will
be available for approximately 30 days.
Transocean is the world's largest offshore drilling contractor and the leading
provider of drilling management services worldwide. With a fleet of 139 mobile
offshore drilling units plus three ultra-deepwater newbuild drillships under
construction, Transocean's fleet is considered one of the most modern and
versatile in the world due to its emphasis on technically demanding segments of
the offshore drilling business. Transocean owns or operates a contract drilling
fleet of 45 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-
Environment semisubmersibles and drillships), 26 Midwater Floaters, 10 High-
Specification Jackups, 55 Standard Jackups and other assets utilized in the
support of offshore drilling activities worldwide.
(1) Effective Tax Rate is defined as income tax expense divided by income before
income taxes. See the accompanying schedule entitled "Supplemental Effective Tax
Rate Analysis."
(2) Annual Effective Tax Rate is defined as income tax expense excluding various
discrete items (such as changes in estimates and tax on items excluded from
income before income tax expense) divided by income before income tax expense
excluding gains on sales and similar items pursuant to the accounting standards
for income taxes and estimating the annual effective tax rate. See the
accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------- ----------------
2010 2009 2010 2009
------- ------- ------- -------
Operating revenues
Contract drilling revenues $ 2,204 $ 2,602 $ 6,935 $ 8,061
Contract drilling intangible revenues 23 58 85 237
Other revenues 82 163 396 525
------- ------- ------- -------
2,309 2,823 7,416 8,823
------- ------- ------- -------
Costs and expenses
Operating and maintenance 1,213 1,396 3,767 3,844
Depreciation, depletion and
amortization 394 367 1,195 1,082
General and administrative 59 54 180 163
------- ------- ------- -------
1,666 1,817 5,142 5,089
------- ------- ------- -------
Loss on impairment -- (46) (2) (334)
Gain (loss) on disposal of assets, net 2 (3) 256 (3)
------- ------- ------- -------
Operating income 645 957 2,528 3,397
------- ------- ------- -------
Other income (expense), net
Interest income 7 -- 17 2
Interest expense, net of amounts
capitalized (142) (115) (415) (365)
Loss on retirement of debt (22) (7) (20) (17)
Other, net 8 9 18 9
------- ------- ------- -------
(149) (113) (400) (371)
------- ------- ------- -------
Income before income tax expense 496 844 2,128 3,026
Income tax expense 118 138 345 573
------- ------- ------- -------
Net income 378 706 1,783 2,453
Net income (loss) attributable to
noncontrolling interest 10 (4) 23 (5)
------- ------- ------- -------
Net income attributable to controlling
interest $ 368 $ 710 $ 1,760 $ 2,458
======= ======= ======= =======
Earnings per share
Basic $ 1.15 $ 2.20 $ 5.47 $ 7.63
Diluted $ 1.15 $ 2.19 $ 5.47 $ 7.61
Weighted average shares outstanding
Basic 319 321 320 320
Diluted 319 322 320 321
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
September 30, December 31,
2010 2009
----------- -----------
(Unaudited)
Assets
Cash and cash equivalents $ 4,636 $ 1,130
Accounts receivable, net of allowance for
doubtful accounts of $39 and $65 at September 30,
2010 and December 31, 2009, respectively 2,299 2,385
Materials and supplies, net of allowance for
obsolescence of $69 and $66 at September 30,
2010 and December 31, 2009, respectively 501 462
Deferred income taxes, net 100 104
Assets held for sale -- 186
Other current assets 234 209
----------- -----------
Total current assets 7,770 4,476
----------- -----------
Property and equipment 27,644 27,383
Property and equipment of consolidated variable
interest entities 2,192 1,968
Less accumulated depreciation 7,423 6,333
----------- -----------
Property and equipment, net 22,413 23,018
----------- -----------
Goodwill 8,132 8,134
Other assets 1,015 808
----------- -----------
Total assets $ 39,330 $ 36,436
=========== ===========
Liabilities and equity
Accounts payable $ 791 $ 780
Accrued income taxes 226 240
Debt due within one year 1,635 1,568
Debt of consolidated variable interest entities
due within one year 82 300
Other current liabilities 2,030 730
----------- -----------
Total current liabilities 4,764 3,618
----------- -----------
Long-term debt 10,237 8,966
Long-term debt of consolidated variable interest
entities 886 883
Deferred income taxes, net 652 726
Other long-term liabilities 1,752 1,684
----------- -----------
Total long-term liabilities 13,527 12,259
----------- -----------
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947
authorized, 167,617,649 conditionally
authorized, 335,235,298 issued at September 30,
2010 and December 31, 2009; 319,017,904 and
321,223,882 outstanding at September 30, 2010
and December 31, 2009, respectively 4,481 4,472
Additional paid-in capital 6,354 7,407
Treasury shares, at cost, 2,863,267 and none held
at September 30, 2010 and December 31, 2009,
respectively (240) --
Retained earnings 10,768 9,008
Accumulated other comprehensive loss (327) (335)
----------- -----------
Total controlling interest shareholders'
equity 21,036 20,552
----------- -----------
Noncontrolling interest 3 7
----------- -----------
Total equity 21,039 20,559
----------- -----------
Total liabilities and equity $ 39,330 $ 36,436
=========== ===========
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions, except share data)
Three months ended Nine months ended
September 30, September 30,
---------------- ----------------
2010 2009 2010 2009
------- ------- ------- -------
Cash flows from operating activities
Net income $ 378 $ 706 $ 1,783 $ 2,453
Adjustments to reconcile net income to
net cash provided by operating
activities
Amortization of drilling contract
intangibles (23) (58) (85) (237)
Depreciation, depletion and
amortization 394 367 1,195 1,082
Share-based compensation expense 26 23 79 66
Excess tax benefit from share-based
compensation plans -- (9) (1) (10)
(Gain) loss on disposal of assets,
net (2) 3 (256) 3
Loss on impairment -- 46 2 334
Loss on retirement of debt 22 7 20 17
Amortization of debt issue costs,
discounts and premiums, net 48 51 148 160
Deferred income taxes (40) 24 (74) 50
Other, net 2 7 1 30
Deferred revenue, net 47 29 205 72
Deferred expenses, net (18) (3) (55) (38)
Changes in operating assets and
liabilities (125) 213 188 441
------- ------- ------- -------
Net cash provided by operating
activities 709 1,406 3,150 4,423
------- ------- ------- -------
Cash flows from investing activities
Capital expenditures (304) (540) (983) (2,195)
Proceeds from disposal of assets, net -- 2 51 10
Proceeds from insurance recoveries
for loss of drilling unit -- -- 560 --
Proceeds from payments on notes
receivable 10 -- 31 --
Proceeds from short-term investments -- 29 5 422
Purchases of short-term investments -- (34) -- (268)
Joint ventures and other investments,
net (4) 5 (5) 5
------- ------- ------- -------
Net cash used in investing activities (298) (538) (341) (2,026)
------- ------- ------- -------
Cash flows from financing activities
Change in short-term borrowings, net 46 254 (131) (246)
Proceeds from debt 2,000 26 2,054 345
Repayments of debt (691) (1,173) (966) (2,583)
Purchases of shares held in treasury -- -- (240) --
Financing costs (15) -- (15) (2)
Proceeds from (taxes paid for)
share-based compensation plans, net (2) (6) (3) 16
Excess tax benefit from share-based
compensation plans -- 9 1 10
Other, net (1) 1 (3) (14)
------- ------- ------- -------
Net cash provided by (used in)
financing activities 1,337 (889) 697 (2,474)
------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents 1,748 (21) 3,506 (77)
Cash and cash equivalents at beginning
of period 2,888 907 1,130 963
------- ------- ------- -------
Cash and cash equivalents at end of
period $ 4,636 $ 886 $ 4,636 $ 886
======= ======= ======= =======
TRANSOCEAN LTD.
FLEET OPERATING STATISTICS
Operating Revenues ($ Millions) (1)
------------------------------------------------
Nine months ended
Three months ended September 30,
---------------------------- ------------------
September June 30, September
30, 2010 2010 30, 2009 2010 2009
-------- -------- -------- -------- --------
Contract Drilling Revenues
High-Specification
Floaters:
Ultra Deepwater
Floaters $ 720 $ 809 $ 732 $ 2,430 $ 2,107
Deepwater Floaters 350 382 463 1,122 1,282
Harsh Environment
Floaters 178 166 141 520 458
Total High-Specification
Floaters 1,248 1,357 1,336 4,072 3,847
Midwater Floaters 572 521 618 1,616 1,971
High-Specification
Jackups 78 93 104 264 383
Standard Jackups 298 312 537 963 1,835
Other Rigs 8 7 7 20 25
Subtotal 2,204 2,290 2,602 6,935 8,061
Contract Intangible
Revenue 23 29 58 85 237
Other Revenues
Client Reimbursable
Revenues 40 38 49 118 148
Integrated Services and
Other 10 11 53 52 158
Drilling Management
Services 25 129 54 204 198
Oil and Gas Properties 7 8 7 22 21
Subtotal 82 186 163 396 525
Total Company $ 2,309 $ 2,505 $ 2,823 $ 7,416 $ 8,823
Average Daily Revenue (1)
------------------------------------------------
Nine months ended
Three months ended September 30,
---------------------------- ------------------
September June 30, September
30, 2010 2010 30, 2009 2010 2009
-------- -------- -------- -------- --------
High-Specification
Floaters:
Ultra Deepwater
Floaters $422,800 $482,100 $458,500 $464,200 $453,400
Deepwater Floaters $365,600 $395,800 $355,600 $381,800 $344,300
Harsh Environment
Floaters $414,100 $428,500 $386,000 $413,600 $369,400
Total High-Specification
Floaters $403,900 $447,800 $409,300 $431,800 $400,300
Midwater Floaters $328,400 $319,000 $355,800 $326,300 $322,200
High-Specification
Jackups $138,100 $146,100 $161,000 $149,900 $164,400
Standard Jackups $113,200 $117,100 $156,200 $121,100 $153,800
Other Rigs $ 72,900 $ 72,000 $ 73,300 $ 72,600 $ 51,400
Total Drilling Fleet $271,200 $284,200 $283,800 $284,600 $264,500
Utilization (1)
------------------------------------------------
Nine months ended
Three months ended September 30,
---------------------------- ------------------
September June 30, September
30, 2010 2010 30, 2009 2010 2009
-------- -------- -------- -------- --------
High-Specification
Floaters:
Ultra Deepwater
Floaters 77% 76% 90% 80% 93%
Deepwater Floaters 65% 66% 89% 67% 85%
Harsh Environment
Floaters 93% 85% 80% 92% 91%
Total High-Specification
Floaters 75% 74% 88% 77% 89%
Midwater Floaters 73% 69% 72% 70% 82%
High-Specification
Jackups 61% 70% 70% 65% 85%
Standard Jackups 52% 53% 68% 53% 79%
Other Rigs 50% 50% 42% 50% 70%
Total Drilling Fleet 64% 64% 75% 65% 83%
(1) Average daily revenue is defined as contract drilling revenue
earned per revenue earning day in the period. A revenue earning
day is defined as a day for which a rig earns dayrate after
commencement of operations. Utilization is defined as the total
actual number of revenue earning days in the period as a percentage
of the total number of calendar days in the period for all drilling
rigs in our fleet.
Transocean Ltd. and Subsidiaries
Supplemental Effective Tax Rate Analysis
(In millions)
Three months ended Nine months ended
------------------------- ----------------
Sept 30, June 30, Sept 30, Sept 30, Sept 30,
2010 2010 2009 2010 2009
------- ------- ------- ------- -------
Income before income taxes $ 497 $ 818 $ 844 $ 2,129 $ 3,026
Add back (subtract):
Litigation matters 14 12 132 26 132
Gain on loss of Deepwater
Horizon - (267) - (267) -
Loss on disposal of other
assets, net - - (1) 14 2
Loss on impairment of
goodwill and intangible
assets - - 46 2 334
Loss on impairment of
other assets - - - 21 -
(Gain) loss on retirement
of debt 22 - 7 20 17
GSF merger related costs
and other, net - - 4 6 12
Income from TODCO tax
sharing agreement - - (11) - (11)
------- ------- ------- ------- -------
Adjusted income before income
taxes 533 563 1,021 1,951 3,512
Income tax expense 118 98 138 345 573
Add back (subtract):
Loss on impairment of
other assets - - - 7 -
GSF merger related costs - - 1 1 2
Tax effect of the Patient
Protection and Affordable
Care Act - - - (2) -
Changes in estimates(1) (7) (6) 28 (20) (24)
------- ------- ------- ------- -------
Adjusted income tax expense(2) $ 111 $ 92 $ 167 $ 331 $ 551
======= ======= ======= ======= =======
Effective Tax Rate(3) 23.8% 12.0% 16.4% 16.2% 18.9%
Annual Effective Tax Rate(4) 20.8% 16.3% 16.4% 17.0% 15.7%
(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 September 30, 2010 includes $21 million of
additional tax expense (benefit) reflecting the catch-up effect of an
increase (decrease) in the annual effective tax rate from the previous
quarter estimate.
(3) Effective Tax Rate is income tax expense divided by income before
income taxes.
(4) Annual Effective Tax Rate is income tax expense excluding various
discrete items (such as changes in estimates and tax on items excluded
from income before income taxes) divided by income before income taxes
excluding gains and losses on sales and similar items pursuant to the
accounting standards for income taxes and estimating the annual
effective tax rate.
Analyst Contact:
Gregory S. Panagos
+1 713-232-7551
Media Contact:
Guy A. Cantwell
+1 713-232-7647
[HUG#1458770]
--- End of Message ---
Transocean Ltd.
Chemin de Blandonnet 10 Vernier Switzerland
ISIN: CH0048265513;
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