Transocean Ltd. Reports Third Quarter 2009 Financial Results

ZUG, Switzerland, Nov 04, 2009 (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 [phone] 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 [phone] 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 revenues $ 2,602 $ 2,699 $ 8,061 $ 7,926 Contract drilling intangible revenues 58 143 237 557 Other revenues 163 350 525 921 2,823 3,192 8,823 9,404 Costs and expenses Operating and maintenance 1,396 1,426 3,844 3,947 Depreciation, depletion and amortization 367 336 1,082 1,040 General and administrative 54 46 163 140 1,817 1,808 5,089 5,127 Impairment loss (46 ) -- (334 ) -- Loss from disposal of assets, net (3 ) (1 ) (3 ) (4 ) Operating income 957 1,383 3,397 4,273 Other income (expense), net Interest income -- 7 2 30 Interest expense, net of amounts capitalized (115 ) (143 ) (365 ) (473 ) Loss on retirement of debt (7 ) -- (17 ) (3 ) Other, net 9 (12 ) 9 (20 ) (113 ) (148 ) (371 ) (466 ) Income before income tax expense 844 1,235 3,026 3,807 Income tax expense 138 175 573 533 Net income 706 1,060 2,453 3,274 Net loss attributable to noncontrolling interest (4 ) (3 ) (5 ) (3 ) Net income attributable to controlling interest $ 710 $ 1,063 $ 2,458 $ 3,277 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 2,614 2,864 and $114 at September 30, 2009 and December 31, 2008, respectively Materials and supplies, net of allowance for obsolescence of $57 457 432 and $49 at September 30, 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 4,470 4,444 contingently authorized, 335,235,298 issued and 321,139,451 outstanding at September 30, 2009; 502,852,947 authorized, 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 intangibles (58 ) (143 ) (237 ) (557 ) Depreciation, depletion and amortization 367 336 1,082 1,040 Share-based compensation expense 23 16 66 49 Excess tax benefit from share-based compensation plans (9 ) -- (10 ) (11 ) Impairment loss 46 16 334 16 Loss from disposal of assets, net 3 1 3 4 Loss on retirement of debt 7 -- 17 3 Amortization of debt issue costs, discounts and premiums, net 51 44 160 129 Deferred revenue, net 29 (3 ) 72 22 Deferred expenses, net (3 ) (3 ) (38 ) (132 ) Deferred income taxes 24 60 50 4 Other, net 7 7 30 (1 ) Changes in operating assets and liabilities 213 (121 ) 441 (77 ) Net cash provided by operating activities 1,406 1,270 4,423 3,763 Cash flows from investing activities Capital expenditures (540 ) (514 ) (2,195 ) (1,703 ) Proceeds from disposal of assets, net 2 5 10 352 Proceeds from short-term investments 29 14 422 14 Purchases of short-term investments (34 ) (408 ) (268 ) (408 ) Joint ventures and other investments, net 5 -- 5 (3 ) Net cash used in investing activities (538 ) (903 ) (2,026 ) (1,748 ) Cash flows from financing activities Change in short-term borrowings, net 254 202 (246 ) (153 ) Proceeds from debt 26 303 345 2,354 Repayments of debt (1,173 ) (1,000 ) (2,583 ) (4,673 ) Payments for warrant exercises, net -- -- (13 ) (4 ) Proceeds from (taxes paid for) share-based compensation plans, net (6 ) (12 ) 16 49 Excess tax benefit from share-based compensation plans 9 -- 10 11 Other, net 1 (7 ) (3 ) (11 ) Net cash used in financing activities (889 ) (514 ) (2,474 ) (2,427 ) Net decrease in cash and cash equivalents (21 ) (147 ) (77 ) (412 ) Cash and cash equivalents at beginning of period 907 976 963 1,241 Cash and cash equivalents at end of period $ 886 $ 829 $ 886 $ 829 TRANSOCEAN LTD. FLEET OPERATING STATISTICS Operating Revenues ($ Millions) (1) Three months ended Nine months ended September 30, September 30, June 30, September 30, 2009 2008 2009 2009 2008 Contract Drilling Revenues High-Specification Floaters: Ultra Deepwater Floaters $ 732 $ 673 $ 617 $ 2,107 $ 1,783 Deepwater Floaters 463 406 323 1,282 1,025 Harsh Environment Floaters 141 159 163 458 481 Total High-Specification Floaters 1,336 1,238 1,103 3,847 3,289 Midwater Floaters 618 644 690 1,971 2,015 High-Specification Jackups 104 128 144 383 448 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 Intangible Revenue 58 75 143 237 557 Other Revenues Client Reimbursable Revenues 49 48 55 148 152 Integrated Services and Other 53 52 12 158 8 Drilling Management Services 54 74 257 198 693 Oil and Gas Properties 7 8 26 21 68 Subtotal 163 182 350 525 921 Total Company $ 2,823 $ 2,882 $ 3,192 $ 8,823 $ 9,404 Average Dayrates (1) Three months ended Nine months ended September 30, September 30, June 30, September 30, 2009 2008 2009 2009 2008 High-Specification Floaters: Ultra Deepwater Floaters $ 458,500 $ 450,500 $ 401,300 $ 453,400 $ 390,700 Deepwater Floaters $ 355,600 $ 339,600 $ 322,700 $ 344,300 $ 307,600 Harsh Environment Floaters $ 386,000 $ 374,500 $ 363,500 $ 369,400 $ 362,400 Total High-Specification Floaters $ 409,300 $ 397,600 $ 369,300 $ 400,300 $ 356,600 Midwater Floaters $ 355,800 $ 302,700 $ 292,900 $ 322,200 $ 294,800 High-Specification Jackups $ 161,000 $ 161,400 $ 178,500 $ 164,400 $ 176,700 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 Fleet $ 283,800 $ 255,900 $ 242,200 $ 264,500 $ 236,500 Utilization (1) Three months ended Nine months ended September 30, September 30, June 30, September 30, 2009 2008 2009 2009 2008 High-Specification Floaters: Ultra Deepwater Floaters 90 % 91 % 93 % 93 % 93 % Deepwater Floaters 89 % 82 % 68 % 85 % 76 % Harsh Environment Floaters 80 % 93 % 98 % 91 % 97 % Total High-Specification Floaters 88 % 88 % 83 % 89 % 86 % Midwater Floaters 72 % 84 % 88 % 82 % 86 % High-Specification Jackups 70 % 87 % 87 % 85 % 93 % Standard Jackups 68 % 82 % 93 % 79 % 92 % Other Rigs 42 % 59 % 100 % 70 % 100 % Total Drilling Fleet 75 % 84 % 89 % 83 % 89 % (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, 2009 2009 2008 2009 2008 (As adjusted) (As adjusted) Income before income taxes and minority interest $ 844 $ 992 $ 1,235 $ 3,026 $ 3,807 Add back (subtract): Litigation matters 132 - - 132 - GSF merger related costs 4 2 1 12 5 Impairment loss 46 67 16 334 16 Loss on sale of CDC interest - 4 - 4 - Gain on sale of Sedco 135-D (1 ) (1 ) - (2 ) - Loss on retirement of debt 7 8 - 17 3 Income from TODCO tax sharing agreement (11 ) - (14 ) (11 ) (14 ) Adjusted income before income tax expense 1,021 1,072 1,238 3,512 3,817 Income tax expense 138 184 175 573 533 Add back (subtract): GSF merger related costs 1 - 1 2 1 Impairment loss - - 2 - 2 Changes in estimates (1) 28 (16 ) 15 (24 ) (10 ) Adjusted income tax expense (2) $ 167 $ 168 $ 193 $ 551 $ 526 Effective Tax Rate (3) 16.4 % 18.5 % 14.2 % 18.9 % 14.0 % Annual Effective Tax Rate (4) 16.4 % 15.7 % 15.6 % 15.7 % 13.8 % (1) Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in deferred taxes, valuation allowances on deferred taxes and other tax liabilities. (2) The three months ended September 30, 2009 include $7 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 tax expense. (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 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.

CONTACT: Transocean Ltd. Analyst Contact: Gregory S. Panagos, + 1 713-232-7551 or Media Contact: Guy A. Cantwell, [phone] Copyright Business Wire 2009 -0- KEYWORD: United States

Switzerland

Europe

North America

Texas INDUSTRY KEYWORD: Energy

Oil/Gas SUBJECT CODE: Earnings

Conference Call

Webcast