Transocean Ltd. Reports Third Quarter 2015 Results

• Revenues were $1.61 billion, compared with $1.88 billion in the second quarter of 2015;
• Operating and maintenance expenses were $880 million. This compares with $197 million in the prior period that included $788 million in net favorable items associated with Macondo-related settlement agreements, insurance recoveries and other items;
• Adjusted net income was $316 million, $0.87 per diluted share, excluding net favorable items. This compares with $408 million, $1.11 per diluted share, in the second quarter of 2015, excluding net unfavorable items;
• Net income attributable to controlling interest was $321 million, $0.88 per diluted share, including $5 million of net favorable items. This compares with second quarter net income of $342 million, $0.93 per diluted share, including $66 million of net unfavorable items;
• The Annual Effective Tax Rate⁽¹⁾ was 7.5 percent, down from 16.9 percent in the prior quarter;
• Cash flows from operating activities were $648 million, down sequentially from $1.31 billion  due primarily to favorable Macondo-related insurance proceeds in the second quarter of 2015;
• Fleet revenue efficiency⁽²⁾ was 95.0 percent, compared with 97.2 percent in the second quarter of 2015;
• Fleet utilization⁽³⁾ was 70 percent, down from 75 percent in the prior quarter; and
• Contract backlog was $16.9 billion as of the October 26, 2015, Fleet Status Report.

ZUG, SWITZERLAND-November 4, 2015-Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of $321 million, $0.88 per diluted share, for the three months ended September 30, 2015. Third quarter 2015 results included net favorable items of $5 million, $0.01 per diluted share, as follows:

• $8 million, $0.02 per diluted share, in discrete tax benefits;
• $7 million, $0.02 per diluted share, in net gains on early debt retirements; and
• $5 million associated with discontinued operations and asset disposal gains.

These net favorable items were partially offset by:

• $15 million, $0.03 per diluted share, related to a loss on impairment of GSF Rig 135, which the company intends to scrap; and severance costs. 
   

After consideration of these net favorable items, third quarter 2015 adjusted net income was $316 million, or $0.87 per diluted share. 

For the three months ended September 30, 2014, the company reported net loss attributable to controlling interest of $2.22 billion, $6.12 per diluted share, including net unfavorable items of $2.57 billion, $7.08 per diluted share, mainly associated with impairments of goodwill and the Deepwater Floater asset group. After consideration of these net unfavorable items, adjusted net income was $352 million, or $0.96 per diluted share.

Revenues for the three months ended September 30, 2015, decreased $276 million sequentially to $1.61 billion due primarily to lower fleet utilization and a decline in other revenues related to contract termination fees recognized in the second quarter of 2015. To a lesser extent, the decline was impacted by less favorable revenue efficiency.

Operating and maintenance expenses were $880 million during the period. This compares with $985 million in the prior quarter, which excluded $788 million in net favorable Macondo-related items. The decrease of $105 million was due primarily to reduced activity. The third quarter was also favorably impacted by the company's actions to reduce costs.

General and administrative expenses were $45 million, compared with $44 million in the prior quarter.

Depreciation expense decreased $39 million sequentially to $210 million primarily the result of the impairment of the Midwater Floater asset group in the second quarter of 2015.

Transocean's third quarter 2015 Effective Tax Rate⁽⁴⁾ was 4.9 percent, compared with 10.3 percent in the previous quarter. The decrease was due mainly to jurisdictional and operational structure changes for certain rigs that impacted the company's deferred tax assets, partially offset by changes in estimates, and the impact of foreign currency fluctuations. Transocean's Annual Effective Tax Rate for the third quarter of 2015 was 7.5 percent, down from 16.9 percent in the prior quarter. Third quarter income tax expense also included a tax benefit of $18 million, $0.05 per diluted share, to reflect the decrease in the Annual Effective Tax Rate to 18.0 percent for the nine months ended September 30, 2015 from 21.6 percent for the six months ended June 30, 2015.

Interest expense, net of amounts capitalized, decreased $11 million sequentially to $109 million, reflecting, in part, the company's early debt retirements. Capitalized interest was $36 million, compared with $29 million in the second quarter of 2015. Interest income was $5 million, compared with $6 million in the prior quarter.

Cash flows from operating activities decreased $663 million sequentially to $648 million due primarily to the favorable Macondo-related insurance proceeds collected in the second quarter of 2015.

Capital expenditures were $940 million, compared with $195 million in the prior quarter. The increase of $745 million was largely associated with the company's newbuild program and included the final shipyard payment for the Deepwater Thalassa.

"Our continued focus on equipment reliability, uptime, and cost management resulted in another strong quarter for Transocean," said President and Chief Executive Officer, Jeremy Thigpen. "As we move forward in this challenging market, we will continue to identify opportunities to drive unnecessary cost out of our business, while simultaneously investing in opportunities that will enable us to continue to exceed the performance expectations of our customers."

Non-GAAP Financial Measures

All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at www.deepwater.com.

Forward-Looking Statements

The statements described in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements contain words such as "possible," "intend," "will," "if," "expect" or other similar expressions. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in tax estimates, impairment of goodwill, asset impairments, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, fleet utilization, the future prices of oil and gas, capital markets and other factors, including those and other risks discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2014, and in the company's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. 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 results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law.

This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange. Investors must rely on their own evaluation of Transocean and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean.

Conference Call Information

Transocean will conduct a teleconference starting at 9:00 a.m. EST, 3:00 p.m. CET, on Thursday, November 5, 2015, to discuss the results. To participate, dial +1 913-312-1444 and refer to confirmation code 9465171 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode over the Internet and can be accessed at Transocean's website, www.deepwater.com, by selecting "Investor Relations/Overview." Supplemental materials that may be referenced during the teleconference will be posted to Transocean's website and can be found by selecting "Investor Relations/Financial Reports."

A replay of the conference call will be available after 12:00 p.m. EST, 6:00 p.m. CET, on November 5, 2015. The replay, which will be archived for approximately 30 days, can be accessed by dialing +1 719-457-0820 and referring to the confirmation code 9465171. The replay will also be available on the company's website.

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 62 mobile offshore drilling units consisting of 27 ultra-deepwater floaters, seven harsh-environment semisubmersibles, six deepwater floaters, 12 midwater semisubmersibles and 10 high-specification jackups. In addition, the company has seven ultra-deepwater drillships and five high-specification jackups under construction.

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

Analyst Contacts:
Bradley Alexander
+1 713-232-7515

Diane Vento
+1 713-232-8015

Media Contact:
Pam Easton
+1 713-232-7647

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 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 for continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."


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