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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 +1 (913) 312-1305 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 +1 (719) 457-0820 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.
Transocean Ltd. Analyst Contact: Gregory S. Panagos, + 1 713-232-7551 or Media Contact: Guy A. Cantwell, +1 713-232-7647
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