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Transocean, the world’s largest offshore drilling contractor and leading provider of drilling management services reported worse than expected second quarter results Monday with a larger than expected loss, lower revenue and higher expenses.

Transocean Ltd (NYSE: $RIG) Reported Earnings After Close Monday

($0.34) Missed $(0.33) EPS AND $758 Million Missed $766.5 Million Revenue Forecast

Earnings

Transocean reported second quarter earnings on Monday with . Adjusted loss per share was 34 cents comparing to 33 cents expected by analysts. Revenue fell 4% to $758 million coming in lower than $766.5 million expected by the street. The dip in sales was attributed to lower drilling revenuescombined with increase in expenses. Lower oil prices in a tough macro backset with trade wars and weak economic growth and production has hampered the company and drilling industry.

Earlier this month, the Switzerland-based company had reported its quarterly fleet status, with an added approximately $158 million in contract backlog, bringing total backlog to $11.4 billion.

This quarter’s report included the following new contracts: Transocean Barents – Awarded a three-well contract plus three one-well options in Canada; Discoverer India – Awarded a 120-day contract plus six one-well options in Egypt; Leiv Eriksson – Customer exercised two one-well options in the Norwegian North Sea; Dhirubhai Deepwater KG1 – Customer exercised 365-day option off the coast of India; and Deepwater Asgard – Awarded a two-well contract in the U.S. Gulf of Mexico.

Transocean NYSE $RIG

Market Reaction After hours $5.30 −0.070 (1.30%)

Highlights

CEO Jeremy Thigpen said, “Despite some continued uncertainty around oil prices, offshore project economics remain compelling, driving increases in floater contracting and increasing day rates in both the harsh environment and ultra-deepwater markets.”  

  • Average daily revenues rose 2% to $314,900 compared to $308,300 reported last year aided by improvements from the deepwater and midwater floaters.
  • Contract backlog stood at $11.4 billion as of July 2019 compared to $11.7 billion reported last year and sequentially it decreased by 6% reflecting the industry weakness.
  • Operating and maintenance expense surged 18% to $510 million due to increased maintenance expenses for servicing its fleet.
  • Long-term debt contracted 2% to $9.37 billion.
  • Revenue efficiency was 97.8%, compared with 97.9% in the prior quarter;
  • Operating and maintenance expense was $510 million, compared with $508 million in the prior period;

Outlook

Thigpen also added, “Our industry-leading floater fleet, consistently strong operating performance, solid liquidity position, and enviable backlog, position us well as the market continues to recover.”;

Offshore Drilling and Transocean NYSE $RIG

Offshore drillers carried much of the brunt of the oil price collapse and glut. Transocean's revenue and earnings rely on the top energy companies breakeven costs, capex and R&D. Costs are higher than for onshore drillers as such demand increases when oil prices are relatively higher.

In 2016, 28 of Transocean’s 57 rigs were either idle or completely mothballed. On the supply side, one should not look at the absolute number of the supply side.

The company has retired 31 rigs from its fleet over the course of the last two-and-a-half years.

Source:Transocean

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 ultra-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 47 mobile offshore drilling units consisting of 31 ultra-deepwater floaters, 13 harsh environment floaters and four midwater floaters. In addition, Transocean is constructing four ultra-deepwater drillships and one harsh environment semisubmersible in which the company holds a 33.0% interest. For more information about Transocean, please visit: www.deepwater.com.

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