· total contract drilling revenues were $748 million, compared with $816 million in the third quarter of 2018; · revenue efficiency(1) was 96%, compared with 95% in the prior quarter; · operating and maintenance expense was $497 million, compared with ...
· Total contract drilling revenues were $748 million, compared with $816 million in the third quarter of 2018; · Revenue efficiency(1) was 96%, compared with 95% in the prior quarter; · Operating and maintenance expense was $497 million, compared with ...
Total contract drilling revenues were $748 million, compared with $816 million in the third quarter of 2018;
Revenue efficiency(1) was 96%, compared with 95% in the prior quarter;
Operating and maintenance expense was $497 million, compared with $447 million in the prior period;
Net loss attributable to controlling interest was $242 million, $0.48 per diluted share, compared with net loss attributable to controlling interest of $409 million, $0.88 per diluted share, in the third quarter of 2018;
Adjusted net loss was $171 million, $0.34 per diluted share, excluding $71 million of net unfavorable items. This compares with adjusted net income of $30 million, $0.06 per diluted share, in the prior quarter;
Adjusted normalized EBITDA margin was $260 million or 34%, compared with $341 million or 42% in the prior quarter;
Cash flows from operating activities were $238 million, up from $214 million in the prior quarter;
In the fourth quarter, we acquired Ocean Rig in a cash and stock transaction valued at approximately $2.5 billion; and
Contract backlog was $12.2 billion as of the February 2019 Fleet Status Report.
STEINHAUSEN, Switzerland—February 18, 2019—Transocean Ltd. (NYSE: RIG) today reported net loss attributable to controlling interest of $242 million, $0.48 per diluted share, for the three months ended December 31, 2018.
Fourth quarter 2018 results included unfavorable items of $71 million, or $0.14 per diluted share, as follows:
$18 million, $0.03 per diluted share, loss on impairment primarily for three floaters previously announced for retirement;
$12 million, $0.02 per diluted share, in acquisition costs; and
$52 million, $0.11 per diluted share, related to discrete tax expense.
These unfavorable items were partially offset by:
$11 million, $0.02 per diluted share, bargain purchase gain and other favorable items.
After consideration of these net favorable items, fourth quarter 2018 adjusted net loss was $171 million, or $0.34 per diluted share.
Contract drilling revenues for the three months ended December 31, 2018, sequentially decreased $68 million to $748 million due to lower utilization for the company’s ultra-deepwater and harsh environment fleet. Additionally, fourth quarter results were negatively impacted by unexpected weather-related downtime on two of our harsh environment rigs off the coast of Canada resulting in approximately $21 million in lost revenue. Partially offsetting these decreases was a $15 million increase in revenue from three working rigs acquired as part of the Ocean Rig acquisition in December.
Contract drilling revenues included customer early termination fees of $12 million on the Discoverer Clear Leader in the fourth quarter down from $37 million in the prior quarter. The fourth quarter also included a non-cash revenue reduction of $34 million from contract intangible amortization associated with the Songa and Ocean Rig acquisitions. The third quarter non-cash revenue reduction from contract intangible amortization was $29 million.
Operating and maintenance expense was $497 million, compared with $447 million in the prior quarter. The sequential increase was the result of costs related to the reactivation and contract preparation of Development Driller III and increased activity as a result of the Ocean Rig acquisition.
General and administrative expense was $54 million, compared with $35 million in the prior quarter. The increase was primarily due to professional fees associated with the Ocean Rig acquisition and for developing technology for improving fleet performance and reducing costs and a third quarter legal reimbursement that was not repeated in the fourth quarter.
Depreciation expense was $204 million, up from $201 million in the third quarter of 2018. The increase was primarily due to the acquisition of the Ocean Rig fleet.
Interest expense, net of amounts capitalized, was $165 million, compared with $160 million in the prior quarter. The increase was due to the senior notes issued during the fourth quarter of 2018 partially offset by senior secured term loans assumed in the Songa acquisition and retired in the third quarter. Capitalized interest was $8 million in the third and fourth quarters of 2018. Interest income was $17 million, compared with $11 million in the prior quarter.
The Effective Tax Rate(2) was (82.6)%, down from 6.7% in the prior quarter. The decrease was due to an estimate of a reserve item associated with U.S. tax reform (“2017 Tax Act”) in fourth quarter, offset by the release of certain valuation allowances. Additionally, the relative blend of income from operations in certain jurisdictions and fourth quarter financial results impacted tax expense.
Cash flows from operating activities increased $24 million sequentially to $238 million primarily due to the collection of certain receivables and advance payment for a farmout contract.
Fourth quarter 2018 capital expenditures of $44 million were related to the company’s newbuild drillships along with capital expenditures relating to asset and inventory management systems, reactivation of one rig and capital upgrades for certain rigs in our existing fleet. This compares with $48 million in the previous quarter.
“2018 will be remembered as a transformative year in Transocean’s long and storied history,” said President and Chief Executive Officer Jeremy Thigpen. “Through the acquisitions of Songa Offshore and Ocean Rig UDW, we added approximately $4.5 billion dollars of high margin backlog. And, when combined with our investment in a joint venture to market and operate the Transocean Norge, over the course of 2018, we added 21 rigs to our fleet, including 15 of the highest specification ultra-deepwater and harsh environment floaters in the industry.”
Thigpen added: “We also continued to operate at a high level for our customers, delivering full year 2018 revenue efficiency greater than 95%. This consistently strong operating performance, coupled with the quality of our fleet, our global presence and our customer relationships, helped us to secure 37 new floater contracts throughout the year, almost double the amount we booked in the previous year, and almost 50% more than any other offshore driller. Importantly, these contracts added almost $2 billion to our already industry-leading backlog, our largest annual total in the last four years.”
Thigpen concluded: “As evidenced by the increase in contract awards, we believe that 2018 marked the beginning of a recovery in the ultra-deepwater market. While oil prices remain volatile, the efficiencies that we have realized over the past few years have materially reduced offshore project costs and compressed the time to deliver first production thereby minimizing our customers’ risk and improving the attractiveness of offshore projects. In fact, current customer conversations suggest that FIDs in 2019 could increase materially over last year.”
Full Year 2018
For the year ended December 31, 2018, net loss attributable to controlling interest totaled $2.0 billion, or $4.27 per diluted share. Full year results included $1.6 billion, $3.48 per diluted share, of unfavorable items as follows:
$1.5 billion, $3.13 per diluted share, loss on impairment of goodwill and eight floaters previously announced for retirement;
$143 million, $0.30 per diluted share, in discrete tax expense;
$34 million, $0.07 per diluted share, in acquisition costs; and
$3 million, or $0.01 per diluted share, related to other unfavorable items.
These unfavorable items were partially offset by:
$10 million, $0.02 per diluted share, bargain purchase gain; and
$7 million, $0.01 per diluted share, gain on disposal of assets.
After excluding these net unfavorable items, adjusted net loss for 2018 was $369 million, or $0.79 per diluted share.
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.
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 48 mobile offshore drilling units consisting of 31 ultra-deepwater floaters, 13 harsh environment floaters and four midwater floaters. In addition, Transocean is constructing four ultra-deepwater drillships and one harsh environment semisubmersible in which the company holds a 33.0% interest.
For more information about Transocean, please visit: www.deepwater.com.
Conference Call Information
Transocean will conduct a teleconference starting at 9 a.m. EST, 3 p.m. CET, on Tuesday, February 19, 2019, to discuss the results. To participate, dial +1 323-994-2093 and refer to conference code 4397725 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. EST, 6 p.m. CET, on February 19, 2019. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 4397725 and PIN 7706. The replay will also be available on the company’s website.
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 Ocean Rig UDW Inc. (“Ocean Rig”), the expected benefits from the transaction, the ability to successfully integrate the Transocean and Ocean Rig businesses, the success of our business following the acquisition of Songa Offshore SE (“Songa”), 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, 2017, 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.
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.”
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.”
Net income (loss) attributable to noncontrolling interest
Net income (loss) attributable to controlling interest
Earnings (loss) per share
Weighted-average shares outstanding
Contract drilling revenues, in the three months and year ended December 31, 2018, includes revenues of (a) $12 million and $124 million, respectively, resulting from contract early terminations and cancellations, (b) $36 million and $130 million, respectively, from customer reimbursements and (c) a reduction of $34 million and $112 million, respectively, resulting from the amortization of contract intangible assets.