Offshore Driller Transocean Reports Surprise Profit

Transocean, the world’s largest offshore drilling contractor and leading provider of drilling management services reported better than expected third quarter results Monday delivering a profit, rather than an expected loss.

Transocean, the world’s largest offshore drilling contractor and leading provider of drilling management services reported better than expected third quarter results Monday delivering a profit, rather than an expected loss.

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

$0.06 Beat $(0.09) EPS AND $816 Million Beat $777.91 Million Revenue Forecast

Earnings

Transocean reported third quarter earnings on Monday of EPS of $0.06, $0.15 better than the analyst estimate of ($0.09). Revenue for the quarter came in at $816 million versus the consensus estimate of $777.91 million. $RIG is still affected  by reduced activity but continues to achieve higher revenue efficiency affecting contract drilling revenues. 

Net loss attributable to controlling interest was $409 million, $0.88 per diluted share, compared with net loss attributable to controlling interest of $1.135 billion, $2.46 per diluted share, in the second quarter of 2018; Adjusted net income was $30 million, $0.06 per diluted share, excluding $439 million of net unfavorable items. This compares with adjusted net loss of $18 million, $0.04 per diluted share, in the prior quarter; Adjusted normalized EBITDA margin was $341 million or 42%, compared with $311 million or 40% in the prior quarter;  This compares with adjusted net loss of $210 million, $0.48 per diluted share, in the prior quarter;

Transocean NYSE $RIG 

Market Reaction After hours 10.73 +0.33 (+3.17%)

Highlights

• Total contract drilling revenues were $816 million, compared with $790 million in the second quarter of 2018;
• Revenue efficiency(1) was 95.2%, compared with 97.4% in the prior quarter;
• Operating and maintenance expense was $447 million, compared with $431 million in the prior period;
• Net loss attributable to controlling interest was $409 million, $0.88 per diluted share, compared with net loss attributable to controlling 
• During the third quarter, the company entered into a definitive merger agreement under which Transocean agreed to acquire Ocean Rig in a cash and stock transaction valued at approximately $2.7 billion, including Ocean Rig’s net debt; and Contract backlog was $11.5 billion as of the October 2018 Fleet Status Report.

Transocean Q2 Earnings Recap

($0.04) Beat ($0.170) EPS and $790 million in revenue 

Earnings

Net loss attributable to controlling interest was $1.135 billion, $2.46 per diluted share, compared with net loss attributable to controlling interest of $210 million, $0.48 per diluted share, in the first quarter of 2018; Adjusted net loss was $18 million, $0.04 per diluted share, excluding $1.117 billion of net unfavorable items. This compares with adjusted net loss of $210 million, $0.48 per diluted share, in the prior quarter;

Transocean Ltd NYSE: $RIG

Market Reaction > After Hours $13.55  +$0.17 (1.27%)

Highlights

• Total contract drilling revenues were $790 million, compared with $664 million in the first quarter of 2018;
• Revenue efficiency(1) was 97.4 percent, compared with 91.5 percent in the prior quarter;
• Operating and maintenance expense was $431 million, compared with $424 million in the prior period;
• During the second quarter, the company acquired a 33% interest in the newbuild, harsh environment semisubmersible Transocean Norge (formerly the West Rigel) through a joint venture with Hayfin Capital Management LLP (“Hayfin”);
• Contract backlog was $11.7 billion as of the July 2018 Fleet Status Report.

Second quarter 2018 results included net unfavorable items of $1.117 billion, or $2.42 per diluted share, as follows:

• $548 million, $1.18 per diluted share, loss on impairment of three floaters previously announced for retirement;
• $463 million, $1.00 per diluted share, associated with a goodwill impairment charge;
• $91 million, $0.20 per diluted share, in discrete tax expense;
• $11 million, $0.03 per diluted share, in restructuring charges;
• $3 million, $0.01 per diluted share, loss on impairment of the deepwater floater asset group; and
• $1 million loss related to the early retirement of debt, offset by gain on disposal of assets.

After consideration of these net unfavorable items, second quarter 2018 adjusted net loss was $18 million, or $0.04 per diluted share.

TransOcean Q2 Fleet Status Report – July 23, 2018

Transocean Ltd.  issued a quarterly Fleet Status Report that provides the current status of, and contract information for, the company’s fleet of offshore drilling rigs.

Since the prior Fleet Status Report, the company has added approximately $405 million in contract backlog. As of today, the company’s backlog is $11.7 billion, which includes dayrate reductions on four of the company’s newbuild drillships related to cost de-escalations attributable to down-manning.

The ultra-deepwater semisubmersible Development Driller III was awarded a 180-day contract offshore Equatorial Guinea. Following maintenance, reactivation and a contract preparation period, the floater is expected to commence operations in the first quarter of 2019.

This report also includes the following new contracts:

• Deepwater Asgard – Customer exercised a one-well option;
• GSF Development Driller I – Awarded an 11-well contract plus four one-well options offshore Australia;
• Deepwater Nautilus – Customer exercised two one-well options offshore Malaysia;
• Transocean Spitsbergen – Awarded a three-well contract plus six one-well options offshore Norway.

In addition, customer exercised two one-well options;

• Transocean Barents – Awarded a six-month contract extension plus an option offshore Eastern Canada;
• Transocean Leader – Awarded a one-well contract in the U.K. North Sea;
• Transocean Arctic – Customer exercised a one-well option offshore Norway; and
• Transocean 712 – Awarded a 13-well contract plus a one-well option in the U.K. North Sea.

As previously announced, the company has retired, in an environmentally responsible manner, the following four floaters: Deepwater Discovery, Deepwater Frontier, Deepwater Millennium and Songa Trym. The report can be accessed on the company’s website: www.deepwater.com.

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, AlphaStreet 

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