Thursday, October 3, 2024

Higher profits for Transocean

February 23, 2017

Transocean Ltd. reported their Fourth Quarter and Full Year 2016 Results.

 * Revenues were $974 million, up from $906 million in the third quarter of 2016
 * Operating and maintenance expense was $314 million, including $30 million in favorable items associated with litigation matters. This compares with $407 million in the prior period;
 * Net income attributable to controlling interest was $226 million, $0.60 per diluted share, compared with $230 million, $0.62 per diluted share, in the third quarter of 2016;
 * Adjusted net income was $239 million, $0.63 per diluted share, excluding $13 million of net unfavorable items. This compares with $100 million, $0.27 per diluted share, in the prior quarter, excluding $130 million of net favorable items;
 * Effective Tax Rate excluding discrete items (1) was 11.6 percent, compared with 18.2  percent in the third quarter of 2016;
 * Cash flows from operating activities were $633 million, up from $440 million in the previous quarter;
 * Revenue efficiency(2) was 100.3 percent, compared with 100.7 percent in the third quarter of 2016; and
 * Contract backlog was $11.3 billion as of the February 2017 Fleet Status Report
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ZUG, SWITZERLAND-February 23, 2017-Transocean Ltd. (RIG) (NYSE: RIG) today reported net income attributable to controlling interest of $226 million, $0.60 per diluted share, for the three months ended December 31, 2016. Other income included $39 million of royalties associated with the company's patented dual-activity technology.

Fourth quarter 2016 results included net unfavorable items of $13 million, or $0.03 per diluted share as follows:

 * $66 million, $0.16 per diluted share, related to loss on impairment of assets; and
 * $11 million, $0.03 per diluted share, in restructuring costs.
These net unfavorable items were partially offset by:

 * $31 million, $0.08 per diluted share, in discrete tax benefits;
 * $28 million, $0.07 per diluted share, in favorable items related to litigation matters; and
 * $5 million, $0.01 per diluted share, related to a gain on rig sales.

After consideration of these net unfavorable items, fourth quarter 2016 adjusted net income was $239 million, or $0.63 per diluted share.

Contract drilling revenues for the three months ended December 31, 2016, decreased $93 million sequentially to $793 million due primarily to reduced activity and lower dayrates.

Other revenues increased $161 million sequentially to $181 million due to early contract termination fees associated with the Discoverer India.

Operating and maintenance expense was $314 million, compared with $407 million in the prior quarter. The decrease was due to the benefits of the company's restructuring initiatives, lower maintenance and other expenses on both active and stacked rigs, and lower costs related to the Transocean Winner incident. Fourth quarter 2016 was also favorably impacted by $30 million associated with litigation matters, and certain other favorable items that are not expected to reoccur in the first quarter of 2017.

General and administrative expense was $47 million, compared with $43 million in the third quarter of 2016. The increase was due primarily to restructuring costs, including acquisition expenses related to the Transocean Partners merger.

The Effective Tax Rate(4) was 1.0 percent, up from (2.5) percent in the prior quarter. The Effective Tax Rate excluding discrete items was 11.6 percent, down from 18.2 percent in the previous quarter. The decrease was due to changes in adjusted pre-tax income and mix of operating results from certain jurisdictions.

Interest expense, net of amounts capitalized, was $113 million, compared with $109 million in the prior quarter. Capitalized interest increased $5 million sequentially to $46 million. Interest income was $5 million, unchanged from the prior quarter.

Cash flows from operating activities increased $193 million sequentially to $633 million. The increase was due primarily to payments associated with the company's contracted, undelivered newbuild drillships.

Fourth quarter 2016 capital expenditures of $272 million were primarily related to the company's newbuild program. This compares with $246 million in the previous quarter.

"In the face of a very challenging market, we again produced impressive operational and financial results in the fourth quarter," said President and Chief Executive Officer Jeremy Thigpen. "For the second consecutive quarter, driven by our stellar uptime performance, and our acute focus on value creation, we delivered revenue efficiency in excess of 100% and EBITDA margins surpassing 50%."

Thigpen added, "As a direct result of our strong performance in 2016, we generated cash flows from operations of $1.9 billion, which, when combined with the multiple financing transactions consummated throughout the year, further strengthened our liquidity. This enviable position, coupled with our industry-leading $11.3 billion backlog, allows us to prudently evaluate strategic opportunities, and continue to invest in our people and our business."

"Looking forward, improving market fundamentals along with a steady flow of customer inquiries are increasing our confidence that the offshore drilling market trough is near."

Full Year 2016

For the year ended December 31, 2016, net income attributable to controlling interest totaled $782 million, or $2.10 per diluted share. Full year results included $127 million, $0.35 per diluted share, of net favorable items as follows:

 * $161 million, $0.44 per diluted share, in gains on early debt retirement and asset disposals;
 * $55 million, $0.15 per diluted share, in discrete tax benefits; and
 * $28 million, $0.08 per diluted share, associated with litigation matters.
These net favorable items were partially offset by:

 * $91 million, $0.25 per diluted share, associated with the loss on impairment of assets; and
 * $26 million, $0.07 per diluted share, in restructuring costs.
After excluding these net favorable items, adjusted net income for 2016 was $655 million, or $1.75 per diluted share.

Financial Statements and Tables

An abbreviated set of financial statements and tables have been provided with this earnings press release, as the company is in the process of completing its year-end audit procedures. In connection with these year-end procedures, the company is addressing the resolution of certain non-cash, tax accounting matters related to prior years.

The company expects the resolution of these matters to favorably impact net income and does not anticipate that they will be material to any year presented.

The company intends to file its Annual Report on Form 10-K next week by the filing deadline.

Non-GAAP Financial Measures

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.

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