×

Transocean Ltd. Reports Third Quarter 2017 Results

  • Revenues were $808 million, compared with $751 million in the second quarter of 2017;
  • Revenue efficiency(1) was 97.1 percent, compared with 97.4 percent in the prior quarter;
  • Operating and maintenance expense was $323 million, compared with $333 million in the previous quarter;
  • Net loss attributable to controlling interest was $1.417 billion, $3.62 per diluted share, compared with net loss attributable to controlling interest of $1.690 billion, $4.32 per diluted share, in the second quarter of 2017;
  • Adjusted net income was $64 million, excluding $1.481 billion of net unfavorable items primarily related to the previously announced retirement of six floaters. This compares with adjusted net income of $1 million in the prior quarter, excluding $1.691 billion of net unfavorable items primarily related to the $1.597 billion loss on the divestiture of the jackup fleet;
  • Adjusted Normalized EBITDA margin was $349 million or 49 percent, compared with $347 million or 49 percent in the prior quarter;
  • Cash flows from operating activities were $384 million, up from $319 million in the prior quarter; and
  • Contract backlog was $9.4 billion as of the October 2017 Fleet Status Report.

ZUG, Switzerland, Nov. 01, 2017 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE:RIG) today reported net loss attributable to controlling interest of $1.417 billion, $3.62 per diluted share, for the three months ended September 30, 2017.

Third quarter 2017 results included net unfavorable items of $1.481 billion, or $3.78 per diluted share as follows:

  • $1.386 billion, $3.54 per diluted share, loss on impairment associated with the previously announced retirement of six floaters;
  • $90 million, $0.23 per diluted share, in discrete tax expense; and
  • $5 million, $0.01 per diluted share, for acquisition costs related to Songa Offshore and other items.

After consideration of these net unfavorable items, third quarter 2017 adjusted net income was $64 million, or $0.16 per diluted share.

Contract drilling revenues for the three months ended September 30, 2017, decreased $6 million sequentially to $699 million. Fleet utilization improved to 52 percent, compared with 44 percent in the prior quarter, reflecting the positive impact of the warm-stacked reactivation of the ultra-deepwater floaters, the Deepwater Asgard and Development Driller III, and the harsh environment semisubmersible Transocean Barents. The increase in activity was partially offset by the divestiture of the company’s jackup fleet in the second quarter of 2017.

Other revenues were $109 million, compared with $46 million in the prior quarter. The third quarter of 2017 included $87 million awarded to the company in connection with a customer-terminated drilling contract in 2015.

Operating and maintenance expense was $323 million, including $6 million in reimbursements related to the aforementioned award. The third quarter of 2017 was lower than anticipated due to the timing of certain maintenance expenses, contract preparation costs, and recycling costs associated with the previously announced retirements. The quarter was also favorably impacted by the company’s ongoing cost control initiatives. This compares with $333 million in the prior quarter, which included $4 million in unfavorable items associated with litigation matters and restructuring charges.

General and administrative expense was $39 million, up from $35 million in the second quarter of 2017. The increase was due largely to acquisition costs related to Songa Offshore.

Depreciation expense was $197 million, down from $219 million in the second quarter of 2017. The decrease was primarily due to the sale of the jackup fleet in the second quarter of 2017.

Interest expense, net of amounts capitalized, was $112 million, compared with $129 million in the prior quarter. The decrease was largely due to the company’s recent debt capital markets transactions. Capitalized interest was $31 million in third quarter of 2017, compared with $30 million in the prior quarter. Interest income increased $14 million sequentially to $21 million. The increase was almost entirely due to interest related to the aforementioned award.

The Effective Tax Rate(2) was (14.7) percent, down from 2.2 percent in the prior quarter. The decrease in the rate was primarily due to an increase in the company’s U.S. deferred tax asset valuation allowance and current-year losses on impairment and disposal of assets. The Effective Tax Rate excluding discrete items(3) was 56.5 percent, compared with 74.0 percent in the previous quarter. For the three months ended September 30, 2017, the company’s income tax expense was $180 million, which includes $137 million of non‑cash items relating to a valuation allowance on certain deferred tax assets.

Cash flows from operating activities increased $65 million sequentially to $384 million primarily due to the aforementioned award.

Third quarter 2017 capital expenditures of $128 million were primarily related to the company’s contracted newbuild drillships. This compares with $136 million in the previous quarter.

“Despite the challenging environment, we continue to operate at a high level, delivering another quarter in which Revenue Efficiency exceeded 97% and Adjusted Normalized EBITDA margin approached 50%,” said Jeremy Thigpen, President and Chief Executive Officer. “In addition to the strong operating results, during the quarter, we continued the high-grading of our fleet by announcing our intent to acquire Songa Offshore, which includes the addition of four new, high-specification, harsh environment semisubmersibles. We also announced our decision to recycle six additional floaters, further improving the overall quality and competitiveness of our fleet.”

Thigpen added: “During October, we issued $750 million of senior unsecured debt with the intent of retiring our near-dated maturities. This action, coupled with cash flow from operations of $384 million, and the anticipated incremental backlog of approximately $4 billion attributable to the Songa Offshore transaction, further extends our liquidity runway, and positions us well for a market recovery.”

Non-GAAP Financial Measures

We present our operating results in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). We believe certain financial measures, such as Adjusted Net Income, EBITDA, Adjusted EBITDA and Adjusted Normalized EBITDA, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under U.S. GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. Such non-GAAP measures should be considered as a supplement to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP.

All non-GAAP measure reconciliations to the most comparative U.S. GAAP measures are displayed in quantitative schedules on the company’s website at: www.deepwater.com.

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 39 mobile offshore drilling units consisting of 26 ultra-deepwater floaters, seven harsh environment floaters, two deepwater floaters and four midwater floaters. In addition, the company has three ultra-deepwater drillships under construction or under contract to be constructed. We also continue to operate two high-specification jackups that were under drilling contracts when we sold the rigs, and we continue to operate these jackups until completion or novation of the drilling contracts.

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

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EDT, 2 p.m. CET, on Thursday, November 2, 2017, to discuss the results. To participate, dial +1 719-457-2664 and refer to conference code 1809944 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode at: www.deepwater.com, by selecting Investors, News, and Webcasts. Supplemental materials that may be referenced during the teleconference will be available at: www.deepwater.com, by selecting Investors, Financial Reports.

A replay of the conference call will be available after 12 p.m. EDT, 5 p.m. CET, on November 2, 2017. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 1809944 and PIN 9876. The replay will also be available on the company’s website.

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, estimated duration of customer contracts, contract dayrate amounts, future contract commencement dates and locations, planned shipyard projects and other out-of-service time, sales of drilling units, timing of the company’s newbuild deliveries, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, the future prices of oil and gas, the intention to scrap certain drilling rigs, the results of our final accounting for the periods presented in this press release, the timing and likelihood of the completion of the contemplated acquisition of Songa Offshore SE (“Songa”), the expected benefits from such transaction, the ability to successfully integrate the Transocean and Songa businesses 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, 2016, 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. 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.

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. 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.

Notes

  1. 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.”
  2. 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.”
  3. Effective Tax Rate, excluding discrete items, is defined as income tax expense for continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income from continuing operations 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. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

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

Diane Vento
+1 713-232-8015

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

TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2017 2016 2017 2016
Operating revenues
Contract drilling revenues $ 699 $ 886 $ 2,142 $ 2,912
Other revenues 109 20 202 275
808 906 2,344 3,187
Costs and expenses
Operating and maintenance 323 409 999 1,561
Depreciation 197 225 648 667
General and administrative 39 41 113 125
559 675 1,760 2,353
Loss on impairment (1,385) (11) (1,498) (26)
Gain (loss) on disposal of assets, net (9) 9 (1,602) 8
Operating income (loss) (1,145) 229 (2,516) 816
Other income (expense), net
Interest income 21 5 34 15
Interest expense, net of amounts capitalized (112) (109) (368) (296)
Gain (loss) on retirement of debt (1) 110 (49) 148
Other, net 6 7 7 9
(86) 13 (376) (124)
Income (loss) before income tax expense (1,231) 242 (2,892) 692
Income tax expense 180 6 103 122
Net income (loss) (1,411) 236 (2,995) 570
Net income attributable to noncontrolling interest 6 18 21 35
Net income (loss) attributable to controlling interest $ (1,417) $ 218 $ (3,016) $ 535
Earnings (loss) per share
Earnings (loss) per share—basic $ (3.62) $ 0.59 $ (7.72) $ 1.44
Earnings (loss) per share—diluted $ (3.62) $ 0.59 $ (7.72) $ 1.44
Weighted-average shares outstanding
Basic 391 365 391 365
Diluted 391 365 391 365


TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)

September 30, December 31,
2017 2016
Assets
Cash and cash equivalents $ 2,717 $ 3,052
Accounts receivable, net of allowance for doubtful accounts of less than $1 at September 30, 2017 and December 31, 2016 663 898
Materials and supplies, net of allowance for obsolescence of $154 and $153 at September 30, 2017 and December 31, 2016, respectively 437 561
Restricted cash 480 466
Other current assets 154 121
Total current assets 4,451 5,098
Property and equipment 22,599 27,372
Less accumulated depreciation (5,117) (6,279)
Property and equipment, net 17,482 21,093
Deferred income taxes, net 167 298
Other assets 341 400
Total assets $ 22,441 $ 26,889
Liabilities and equity
Accounts payable $ 172 $ 206
Accrued income taxes 159 95
Debt due within one year 799 724
Other current liabilities 755 960
Total current liabilities 1,885 1,985
Long-term debt 6,501 7,740
Deferred income taxes, net 106 178
Other long-term liabilities 1,098 1,153
Total long-term liabilities 7,705 9,071
Commitments and contingencies
Redeemable noncontrolling interest 48 28
Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at September 30, 2017 and December 31, 2016 and 391,211,739 and 389,366,241 outstanding at September 30, 2017 and December 31, 2016, respectively 37 36
Additional paid-in capital 11,020 10,993
Retained earnings 2,040 5,056
Accumulated other comprehensive loss (298) (283)
Total controlling interest shareholders’ equity 12,799 15,802
Noncontrolling interest 4 3
Total equity 12,803 15,805
Total liabilities and equity $ 22,441 $ 26,889


TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine months ended
September 30,
2017
2016
Cash flows from operating activities
Net income (loss) $ (2,995) $ 570
Adjustments to reconcile to net cash provided by operating activities:
Depreciation 648 667
Share-based compensation expense 30 31
Loss on impairment 1,498 26
(Gain) loss on disposal of assets, net 1,602 (8)
(Gain) loss on retirement of debt 49 (148)
Deferred income tax expense 32 44
Other, net 29 11
Changes in deferred revenues, net (109) (30)
Changes in deferred costs, net 42 64
Changes in other operating assets and liabilities, net 61 51
Net cash provided by operating activities 887 1,278
Cash flows from investing activities
Capital expenditures (386) (1,072)
Proceeds from disposal of assets, net 330 16
Other, net 10
Net cash used in investing activities (46) (1,056)
Cash flows from financing activities
Proceeds from issuance of debt, net of discounts and issue costs 403 1,210
Repayments of debt (1,629) (1,316)
Deposits to cash accounts restricted for financing activities (78) (24)
Proceeds from cash accounts and investments restricted for financing activities 131 124
Distributions to holders of noncontrolling interest (23)
Other, net (3) 2
Net cash used in financing activities (1,176) (27)
Net increase (decrease) in cash and cash equivalents (335) 195
Cash and cash equivalents at beginning of period 3,052 2,339
Cash and cash equivalents at end of period $ 2,717 $ 2,534


TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS
Operating Revenues (in millions)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
Contract drilling revenues
Ultra-deepwater floaters $ 511 $ 497 $ 584 $ 1,513 $ 1,758
Harsh environment floaters 106 104 102 332 383
Deepwater floaters 35 36 43 106 179
Midwater floaters 18 18 87 49 358
High-specification jackups 29 50 66 142 223
Contract intangible revenue 4 11
Total contract drilling revenues 699 705 886 2,142 2,912
Other revenues
Customer early termination fees 100 40 9 176 227
Customer reimbursement revenues and other 9 6 11 26 48
Total other revenues 109 46 20 202 275
Total revenues $ 808 $ 751 $ 906 $ 2,344 $ 3,187


Average Daily Revenue (1)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
Ultra-deepwater floaters $ 449,300 $ 482,200 $ 487,800 $ 481,900 $ 492,600
Harsh environment floaters 213,100 262,200 225,900 248,700 356,700
Deepwater floaters 187,300 199,000 234,100 192,800 266,400
Midwater floaters 98,900 100,300 240,400 97,500 303,300
High-specification jackups 151,200 142,800 143,100 143,600 143,800
Total drilling fleet $ 319,000 329,900 $ 332,100 $ 328,800 $ 360,700


Utilization (2)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
Ultra-deepwater floaters 42% 38% 45% 39% 46%
Harsh environment floaters 77% 62% 71% 70% 56%
Deepwater floaters 69% 67% 50% 67% 54%
Midwater floaters 50% 33% 42% 35% 43%
High-specification jackups 95% 54% 50% 56% 57%
Total drilling fleet 52% 44% 49% 46% 49%


Revenue Efficiency (3)
Three months ended Nine months ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
Ultra-deepwater floaters 98.6% 97.1% 99.6% 97.9% 97.8%
Harsh environment floaters 92.0% 98.4% 96.6% 95.8% 97.8%
Deepwater floaters 90.0% 95.6% 96.0% 92.7% 96.3%
Midwater floaters 97.4% 98.8% 103.5% 96.2% 99.0%
High-specification jackups 99.3% 98.7% 114.5% 101.2% 97.6%
Total drilling fleet 97.1% 97.4% 100.4% 97.4% 97.8%
(1) Average daily revenue is defined as contract drilling revenues earned per operating day. An operating day is defined as a calendar day during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations.
(2) Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed as a percentage.
(3) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation 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.


TRANSOCEAN LTD. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE
(In millions, except per share data)
YTD QTD YTD QTD QTD
09/30/17 09/30/17 06/30/17 06/30/17 03/31/17
Adjusted Net Income
Net income (loss) attributable to controlling interest, as reported $ (3,016) $ (1,417) $ (1,599) $ (1,690) $ 91
Add back (subtract):
Litigation matters (7) (7) 1 (8)
Restructuring charges 1 (1) 2 2
Acquisition costs 4 4
Loss on impairment of assets 1,499 1,386 113 113
(Gain) loss on disposal of assets, net 1,596 1 1,595 1,597 (2)
Loss on retirement of debt 49 1 48 48
Discrete tax items and other, net (57) 90 (147) (70) (77)
Net income, as adjusted $ 69 $ 64 $ 5 $ 1 $ 4
Adjusted Diluted Earnings Per Share:
Diluted earnings (loss) per share, as reported $ (7.72) $ (3.62) $ (4.09) $ (4.32) $ 0.23
Add back (subtract):
Litigation matters (0.02) (0.02) (0.02)
Restructuring charges
Acquisition costs 0.01 0.01
Loss on impairment of assets 3.84 3.54 0.29 0.29
Loss on disposal of assets, net 4.08 4.08 4.08
Loss on retirement of debt 0.12 0.12 0.12
Discrete tax items and other, net (0.13) 0.23 (0.37) (0.17) (0.20)
Diluted earnings per share, as adjusted $ 0.18 $ 0.16 $ 0.01 $ $ 0.01


YTD QTD YTD QTD YTD QTD QTD
12/31/16 12/31/16 09/30/16 09/30/16 06/30/16 06/30/16 03/31/16
Adjusted Net Income
Net income attributable to controlling interest, as reported $ 778 $ 243 $ 535 $ 218 $ 317 $ 82 $ 235
Add back (subtract):
Litigation matters (28) (28)
Restructuring charges 26 11 15 4 11 7 4
Loss on impairment of assets 91 66 25 11 14 12 2
Gain on disposal of assets, net (13) (5) (8) (3) (5) (4) (1)
Gain on retirement of debt (148) (148) (110) (38) (38)
(Income) loss from discontinued operations (1) 1
Discrete tax items and other, net (50) (26) (24) (32) 8 7 1
Net income, as adjusted $ 656 $ 261 $ 395 $ 88 $ 307 $ 65 $ 242
Adjusted Diluted Earnings Per Share:
Diluted earnings per share, as reported $ 2.08 $ 0.64 $ 1.44 $ 0.59 $ 0.86 $ 0.22 $ 0.64
Add back (subtract):
Litigation matters (0.08) (0.07)
Restructuring charges 0.07 0.03 0.04 0.01 0.03 0.02 0.01
Loss on impairment of assets 0.25 0.16 0.06 0.03 0.04 0.03
Gain on disposal of assets, net (0.04) (0.01) (0.02) (0.01) (0.01) (0.01)
Gain on retirement of debt (0.40) (0.40) (0.30) (0.11) (0.11)
(Income) loss from discontinued operations
Discrete tax items and other, net (0.12) (0.06) (0.06) (0.08) 0.02 0.02
Diluted earnings per share, as adjusted $ 1.76 $ 0.69 $ 1.06 $ 0.24 $ 0.83 $ 0.17 $ 0.65


TRANSOCEAN LTD. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
EARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION AND RELATED MARGINS
(In millions, except percentages)
YTD QTD YTD QTD QTD
09/30/17 09/30/17 06/30/17 06/30/17 03/31/17
Operating revenues$ 2,344 $ 808 $ 1,536 $ 751 $ 785
Drilling contract termination fees (176) (99) (77) (40) (37)
Adjusted Normalized Revenues$ 2,168 $ 709 $ 1,459 $ 711 $ 748
Net income (loss)$ (2,995) $ (1,411) $ (1,584) $ (1,679) $ 95
Interest expense, net of interest income 334 91 243 122 121
Income tax expense (benefit) 103 180 (77) (37) (40)
Depreciation expense 648 197 451 219 232
EBITDA (1,910) (943) (967) (1,375) 408
Litigation matters (6) (6) 2 (8)
Restructuring charges 2 2 2
Acquisition costs 4 4
Loss on impairment of assets 1,498 1,385 113 113
(Gain) loss on disposal of assets, net 1,596 1 1,595 1,597 (2)
Loss on retirement of debt 49 1 48 48
Adjusted EBITDA 1,233 448 785 387 398
Drilling contract termination fees (176) (99) (77) (40) (37)
Adjusted Normalized EBITDA$ 1,057 $ 349 $ 708 $ 347 $ 361
EBITDA margin (81)% (117)% (63)% (183)% 52%
Adjusted EBITDA margin 53% 55% 51% 52% 51%
Adjusted Normalized EBITDA margin 49% 49% 49% 49% 48%


YTD QTD YTD QTD YTD QTD QTD
12/31/16 12/31/16 09/30/16 09/30/16 06/30/16 06/30/16 03/31/16
Operating revenues $ 4,161 $ 974 $ 3,187 $ 906 $ 2,281 $ 940 $ 1,341
Drilling contract termination fees (396) (169) (227) (9) (218) (9) (209)
Adjusted Normalized Revenues $ 3,765 $ 805 $ 2,960 $ 897 $ 2,063 $ 931 $ 1,132
Net income $ 827 $ 257 $ 570 $ 236 $ 334 $ 93 $ 241
Interest expense, net of interest income 389 108 281 104 177 94 83
Income tax expense (benefit) 107 (15) 122 6 116 18 98
Depreciation expense 893 226 667 225 442 225 217
EBITDA 2,216 576 1,640 571 1,069 430 639
Restructuring charges 28 11 17 4 13 8 5
Litigation matters (30) (30)
Loss on impairment of assets 93 67 26 11 15 12 3
Gain on disposal of assets, net (13) (5) (8) (3) (5) (4) (1)
Gain on retirement of debt (148) (148) (110) (38) (38)
(Income) loss from discontinued operations, net of tax (1) 1
Adjusted EBITDA 2,146 619 1,527 473 1,054 407 647
Drilling contract termination fees (396) (169) (227) (9) (218) (9) (209)
Adjusted Normalized EBITDA $ 1,750 $ 450 $ 1,300 $ 464 $ 836 $ 398 $ 438
EBITDA margin 53% 59% 51% 63% 47% 46% 48%
Adjusted EBITDA margin 52% 64% 48% 52% 46% 43% 48%
Adjusted Normalized EBITDA margin 46% 56% 44% 52% 41% 43% 39%


TRANSOCEAN LTD. AND SUBSIDIARIES
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS
(In millions, except tax rates)
Three months ended Year ended
September 30, June 30, September 30, September 30, September 30,
2017 2017 2016 2017 2016
Income (loss) from continuing operations before income taxes $ (1,231) $ (1,716) $ 242 $ (2,892) $ 692
Add back (subtract):
Litigation matters 2 (6)
Restructuring charges 2 4 2 17
Acquisition costs 4 4
Loss on impairment of assets 1,385 113 11 1,498 26
(Gain) loss on disposal of assets, net 1 1,597 (3) 1,596 (8)
(Gain) loss on retirement of debt 1 48 (110) 49 (148)
Adjusted income from continuing operations before income taxes $ 160 $ 46 $ 144 $ 251 $ 579
Income tax expense (benefit) from continuing operations $ 180 $ (37) $ 6 $ 103 $ 122
Add back (subtract):
Litigation matters 1 1
Restructuring charges 1 1 2
Acquisition costs
Loss on impairment of assets (1) (1) 1
Gain on disposal of assets, net
Changes in estimates (1) (90) 70 32 57 24
Adjusted income tax expense from continuing operations (2) $ 90 $ 34 $ 38 $ 161 $ 149
Effective Tax Rate (3) (14.7)% 2.2% 2.5% (3.6)% 17.8%
Effective Tax Rate, excluding discrete items (4) 56.5% 74.0% 26.6% 64.2%
25.9%
(1) Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities.
(2) The three and nine months ended September 30, 2017 includes $(13) 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) Our effective tax rate is calculated as income tax expense for continuing operations divided by income from continuing operations before income taxes.
(4) Our effective tax rate, excluding discrete items, is calculated as income tax expense for continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income from continuing operations 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.