Transocean Ltd. Reports Third Quarter 2009 Financial Results
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ZUG, Switzerland--(BUSINESS WIRE)-- Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest for the three months ended September 30, 2009 of $710 million, or $2.19 per diluted share, compared to net income attributable to controlling interest of $1.063 billion, or $3.30 per diluted share for the three months ended September 30, 2008. Revenues for the third quarter of 2009 were $2.823 billion compared to $3.192 billion for the third quarter 2008.
Third quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $148 million, or $0.46 per diluted share, as follows:
-- $132 million related to various litigation matters,
-- $46 million for impairment of intangible assets related to drilling
management services,
-- $10 million primarily related to the retirement of debt and expenses
associated with the GlobalSantaFe merger,
-- partially offset by $40 million of 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, 2009 decreased slightly to $2.823 billion, compared to revenues of $2.882 billion during the three months ended June 30, 2009. The decrease was primarily due to a $164 million reduction in revenue resulting from the stacking of rigs and decreased activity, partially offset by a $108 million increase in revenue due to the commencement of operations of two of our newbuild drillships and improvements in dayrates and revenue efficiency.
Operating and maintenance expenses for three months ended September 30, 2009 were $1.396 billion, compared to $1.277 billion for the prior three-month period, an increase of $119 million or 9.3 percent. The quarter-to-quarter increase in operating and maintenance costs primarily consisted of $137 million related to various litigation matters and increased shipyard expenditures, partially offset by the cost benefits resulting from the stacking of rigs.
General and administrative expenses of $54 million for the third quarter of 2009 were essentially unchanged, compared to the second quarter of 2009.
Interest Expense and Liquidity
Interest expense, net of amounts capitalized, for the third quarter of 2009 totaled $115 million, compared to $114 million for the second quarter of 2009.
As of September 30, 2009, total debt was $11.922 billion, compared to total debt of $12.053 billion as of June 30, 2009, a decrease of $131 million. During the third quarter 2009, the company repaid approximately $1.2 billion of debt. This was offset by an increase of debt of $1.1 billion, including $716 million associated with the Petrobras 10000 capital lease and $353 million of other borrowings.
Cash flow from operating activities totaled $1.406 billion for the third quarter of 2009, compared to $1.576 billion for the second quarter 2009.
Effective Tax Rate
Transocean's reported Effective Tax Rate(1) of 16.4 percent for the third quarter of 2009 reflects a benefit from various discrete tax items of $29 million which primarily resulted from changes in estimates. Excluding these items as well as the adverse charges detailed above, the Annual Effective Tax Rate(2) for the third quarter of 2009 was 16.4 percent versus 15.7 percent in the second quarter of 2009.
Conference Call Information
Transocean will conduct a teleconference call at 10:00 a.m. Eastern time, 4:00 p.m. Swiss time, today. To participate, dial +1 (913) 312-1305 and refer to confirmation code 4209411 approximately five to 10 minutes prior to the scheduled start time of the call.
In addition, the conference call will be simultaneously broadcast in a listen-only mode over the Internet and can be accessed by logging onto the company's Web address at www.deepwater.com and selecting "Investor Relations." It may also be accessed at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, "RIG." A file containing five charts to be discussed during the conference call, titled "3Q09 Charts," has been posted to Transocean's Web site and can be found by selecting "Investor Relations."
A telephonic replay of the conference call should be available after 1:00 p.m. Eastern time, 7:00 p.m. Swiss time, on November 4, 2009 and can be accessed by dialing +1 (719) 457-0820 and referring to the passcode 4209411. 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 136 mobile offshore drilling units plus seven announced ultra-deepwater newbuild units, 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 42 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 taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to the accounting standard 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,
2009 2008 2009 2008
(As adjusted) (As adjusted)
Operating revenues
Contract drilling $ 2,602 $ 2,699 $ 8,061 $ 7,926
revenues
Contract drilling 58 143 237 557
intangible revenues
Other revenues 163 350 525 921
2,823 3,192 8,823 9,404
Costs and expenses
Operating and 1,396 1,426 3,844 3,947
maintenance
Depreciation,
depletion and 367 336 1,082 1,040
amortization
General and 54 46 163 140
administrative
1,817 1,808 5,089 5,127
Impairment loss (46 ) -- (334 ) --
Loss from disposal of (3 ) (1 ) (3 ) (4 )
assets, net
Operating income 957 1,383 3,397 4,273
Other income
(expense), net
Interest income -- 7 2 30
Interest expense, net (115 ) (143 ) (365 ) (473 )
of amounts capitalized
Loss on retirement of (7 ) -- (17 ) (3 )
debt
Other, net 9 (12 ) 9 (20 )
(113 ) (148 ) (371 ) (466 )
Income before income 844 1,235 3,026 3,807
tax expense
Income tax expense 138 175 573 533
Net income 706 1,060 2,453 3,274
Net loss attributable
to noncontrolling (4 ) (3 ) (5 ) (3 )
interest
Net income
attributable to $ 710 $ 1,063 $ 2,458 $ 3,277
controlling interest
Earnings per share
Basic $ 2.20 $ 3.32 $ 7.63 $ 10.27
Diluted $ 2.19 $ 3.30 $ 7.61 $ 10.19
Weighted average
shares outstanding
Basic 321 319 320 318
Diluted 322 321 321 321
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
September 30, December 31,
2009 2008
(As adjusted)
Assets
Cash and cash equivalents $ 886 $ 963
Short-term investments 180 333
Accounts receivable, net of allowance for
doubtful accounts of $76 and $114 at September 2,614 2,864
30, 2009 and December 31, 2008, respectively
Materials and supplies, net of allowance for
obsolescence of $57 and $49 at September 30, 457 432
2009 and December 31, 2008, respectively
Deferred income taxes, net 87 63
Assets held for sale 186 464
Other current assets 193 230
Total current assets 4,603 5,349
Property and equipment 28,513 25,836
Less accumulated depreciation 5,983 4,975
Property and equipment, net 22,530 20,861
Goodwill 8,134 8,128
Other assets 751 844
Total assets $ 36,018 $ 35,182
Liabilities and equity
Accounts payable $ 827 $ 914
Accrued income taxes 136 317
Debt due within one year 702 664
Other current liabilities 919 806
Total current liabilities 2,584 2,701
Long-term debt 11,220 12,893
Deferred income taxes, net 772 666
Other long-term liabilities 1,736 1,755
Total long-term liabilities 13,728 15,314
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947
authorized, 167,617,649 contingently authorized,
335,235,298 issued and 321,139,451 outstanding
at September 30, 2009; 502,852,947 authorized, 4,470 4,444
167,617,649 contingently authorized, 335,235,298
issued and 319,262,113 outstanding at December
31, 2008
Additional paid-in capital 7,394 7,313
Retained earnings 8,285 5,827
Accumulated other comprehensive loss (442 ) (420 )
Total controlling interest shareholders' equity 19,707 17,164
Noncontrolling interest (1 ) 3
Total equity 19,706 17,167
Total liabilities and equity $ 36,018 $ 35,182
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
(As adjusted) (As adjusted)
Cash flows from
operating
activities
Net income $ 706 $ 1,060 $ 2,453 $ 3,274
Adjustments to
reconcile net
income to net cash
provided by
operating
activities
Amortization of
drilling contract (58 ) (143 ) (237 ) (557 )
intangibles
Depreciation,
depletion and 367 336 1,082 1,040
amortization
Share-based
compensation 23 16 66 49
expense
Excess tax benefit
from share-based (9 ) -- (10 ) (11 )
compensation plans
Impairment loss 46 16 334 16
Loss from disposal 3 1 3 4
of assets, net
Loss on retirement 7 -- 17 3
of debt
Amortization of
debt issue costs, 51 44 160 129
discounts and
premiums, net
Deferred revenue, 29 (3 ) 72 22
net
Deferred expenses, (3 ) (3 ) (38 ) (132 )
net
Deferred income 24 60 50 4
taxes
Other, net 7 7 30 (1 )
Changes in
operating assets 213 (121 ) 441 (77 )
and liabilities
Net cash provided
by operating 1,406 1,270 4,423 3,763
activities
Cash flows from
investing
activities
Capital (540 ) (514 ) (2,195 ) (1,703 )
expenditures
Proceeds from
disposal of assets, 2 5 10 352
net
Proceeds from
short-term 29 14 422 14
investments
Purchases of
short-term (34 ) (408 ) (268 ) (408 )
investments
Joint ventures and
other investments, 5 -- 5 (3 )
net
Net cash used in
investing (538 ) (903 ) (2,026 ) (1,748 )
activities
Cash flows from
financing
activities
Change in
short-term 254 202 (246 ) (153 )
borrowings, net
Proceeds from debt 26 303 345 2,354
Repayments of debt (1,173 ) (1,000 ) (2,583 ) (4,673 )
Payments for
warrant exercises, -- -- (13 ) (4 )
net
Proceeds from
(taxes paid for)
share-based (6 ) (12 ) 16 49
compensation plans,
net
Excess tax benefit
from share-based 9 -- 10 11
compensation plans
Other, net 1 (7 ) (3 ) (11 )
Net cash used in
financing (889 ) (514 ) (2,474 ) (2,427 )
activities
Net decrease in
cash and cash (21 ) (147 ) (77 ) (412 )
equivalents
Cash and cash
equivalents at 907 976 963 1,241
beginning of period
Cash and cash
equivalents at end $ 886 $ 829 $ 886 $ 829
of period
TRANSOCEAN LTD.
FLEET OPERATING STATISTICS
Operating Revenues ($ Millions) (1)
Nine months ended
Three months ended
September 30,
September June 30, September
30, 30, 2009 2008
2009
2009 2008
Contract Drilling
Revenues
High-Specification
Floaters:
Ultra Deepwater $ 732 $ 673 $ 617 $ 2,107 $ 1,783
Floaters
Deepwater Floaters 463 406 323 1,282 1,025
Harsh Environment 141 159 163 458 481
Floaters
Total
High-Specification 1,336 1,238 1,103 3,847 3,289
Floaters
Midwater Floaters 618 644 690 1,971 2,015
High-Specification 104 128 144 383 448
Jackups
Standard Jackups 537 608 749 1,835 2,134
Other Rigs 6 7 13 25 40
Subtotal 2,602 2,625 2,699 8,061 7,926
Contract 58 75 143 237 557
Intangible Revenue
Other Revenues
Client
Reimbursable 49 48 55 148 152
Revenues
Integrated 53 52 12 158 8
Services and Other
Drilling
Management 54 74 257 198 693
Services
Oil and Gas 7 8 26 21 68
Properties
Subtotal 163 182 350 525 921
Total Company $ 2,823 $ 2,882 $ 3,192 $ 8,823 $ 9,404
Average Dayrates (1)
Nine months ended
Three months ended
September 30,
September June 30, September
30, 30, 2009 2008
2009
2009 2008
High-Specification
Floaters:
Ultra Deepwater $ 458,500 $ 450,500 $ 401,300 $ 453,400 $ 390,700
Floaters
Deepwater Floaters $ 355,600 $ 339,600 $ 322,700 $ 344,300 $ 307,600
Harsh Environment $ 386,000 $ 374,500 $ 363,500 $ 369,400 $ 362,400
Floaters
Total
High-Specification $ 409,300 $ 397,600 $ 369,300 $ 400,300 $ 356,600
Floaters
Midwater Floaters $ 355,800 $ 302,700 $ 292,900 $ 322,200 $ 294,800
High-Specification $ 161,000 $ 161,400 $ 178,500 $ 164,400 $ 176,700
Jackups
Standard Jackups $ 156,200 $ 149,200 $ 158,700 $ 153,800 $ 151,400
Other Rigs $ 73,300 $ 48,300 $ 48,900 $ 51,400 $ 49,000
Total Drilling $ 283,800 $ 255,900 $ 242,200 $ 264,500 $ 236,500
Fleet
Utilization (1)
Nine months ended
Three months ended
September 30,
September June 30, September
30, 30, 2009 2008
2009
2009 2008
High-Specification
Floaters:
Ultra Deepwater 90 % 91 % 93 % 93 % 93 %
Floaters
Deepwater Floaters 89 % 82 % 68 % 85 % 76 %
Harsh Environment 80 % 93 % 98 % 91 % 97 %
Floaters
Total
High-Specification 88 % 88 % 83 % 89 % 86 %
Floaters
Midwater Floaters 72 % 84 % 88 % 82 % 86 %
High-Specification 70 % 87 % 87 % 85 % 93 %
Jackups
Standard Jackups 68 % 82 % 93 % 79 % 92 %
Other Rigs 42 % 59 % 100 % 70 % 100 %
Total Drilling 75 % 84 % 89 % 83 % 89 %
Fleet
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
(1) 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,
2009 2009 2008 2009 2008
(As adjusted) (As adjusted)
Income
before
income $ 844 $ 992 $ 1,235 $ 3,026 $ 3,807
taxes and
minority
interest
Add back
(subtract):
Litigation 132 - - 132 -
matters
GSF merger
related 4 2 1 12 5
costs
Impairment 46 67 16 334 16
loss
Loss on
sale of CDC - 4 - 4 -
interest
Gain on
sale of (1 ) (1 ) - (2 ) -
Sedco 135-D
Loss on
retirement 7 8 - 17 3
of debt
Income from
TODCO tax (11 ) - (14 ) (11 ) (14 )
sharing
agreement
Adjusted
income
before 1,021 1,072 1,238 3,512 3,817
income tax
expense
Income tax 138 184 175 573 533
expense
Add back
(subtract):
GSF merger
related 1 - 1 2 1
costs
Impairment - - 2 - 2
loss
Changes in
estimates 28 (16 ) 15 (24 ) (10 )
(1)
Adjusted
income tax $ 167 $ 168 $ 193 $ 551 $ 526
expense (2)
Effective
Tax Rate 16.4 % 18.5 % 14.2 % 18.9 % 14.0 %
(3)
Annual
Effective 16.4 % 15.7 % 15.6 % 15.7 % 13.8 %
Tax Rate
(4)
Our estimates change as we file tax returns, settle disputes with tax
(1) authorities or become aware of other events and include changes in deferred
taxes, valuation allowances on deferred taxes and other tax liabilities.
The three months ended September 30, 2009 include $7 million of additional
(2) 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
tax expense.
Annual Effective Tax Rate is income tax expense excluding various discrete
items (such as changes in estimates and tax on items excluded from income
(4) before income tax expense) divided by income before income tax expense
excluding gains and losses on sales and similar items pursuant to the
accounting standards for income taxes and estimating the annual effective
tax rate.
Source: Transocean Ltd.
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