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  • 2018 October 30 13:15

    Transocean Ltd. reports 3Q 2018 results

    Transocean Ltd. (NYSE: RIG) on October 29, 2018 reported net loss attributable to controlling interest of $409 million, $0.88 per diluted share, for the three months ended September 30, 2018.

    Third quarter 2018 results included net unfavorable items of $439 million, or $0.94 per diluted share, as follows:
    $432 million, $0.93 per diluted share, loss on impairment primarily for two floaters previously announced for retirement;
    $4 million, $0.01 per diluted share, in acquisition costs; and
    $3 million loss related to other unfavorable items.

    After consideration of these net unfavorable items, third quarter 2018 adjusted net income was $30 million, or $0.06 per diluted share.

    Contract drilling revenues for the three months ended September 30, 2018, sequentially increased $26 million to $816 million due to higher utilization partially offset by lower revenue efficiency on the company’s ultra-deepwater fleet.

    Contract drilling revenues included customer early termination fees of $37 million on the Discoverer Clear Leader in both the second and third quarters. The third quarter also included a non-cash revenue reduction of $29 million from contract intangible amortization associated with the Songa acquisition. The second quarter non-cash revenue reduction from contract intangible amortization was $30 million.

    Operating and maintenance expense was $447 million, compared with $431 million in the prior quarter. The sequential increase was the result of the reactivation and contract preparation costs related to Development Driller III and Deepwater Nautilus, increased quarterly maintenance costs and legal fees associated with a dual activity patent settlement; offset by reduced operating costs and the recovery of certain legal fees in Norway.

    General and administrative expense was $35 million, compared with $52 million in the prior quarter. The decrease was primarily due to charges in the second quarter of 2018 related to the early retirement of certain personnel and a legal reimbursement, partially offset by third quarter Ocean Rig acquisition costs.

    Depreciation expense was $201 million, down from $211 million in the second quarter of 2018. The decrease was primarily due to the previously announced floater retirements.

    Interest expense, net of amounts capitalized, was $160 million, compared with $148 million in the prior quarter. The increase was due to the senior secured notes issued during the third quarter of 2018 partially offset by senior secured term loan facilities assumed during the Songa acquisition that were retired. Capitalized interest was $8 million in the third quarter of 2018, compared with $7 million in the prior quarter. Interest income was $11 million, compared with $13 million in the prior quarter.

    The Effective Tax Rate(2) was 6.7%, up from (8.0)% in the prior quarter. The increase was due to the relative blend of income from operations in certain jurisdictions and a tax benefit on the pre-tax loss in the third quarter. In addition, the second quarter of 2018 included a reasonable estimate of transition taxes associated with U.S. tax reform (“2017 Tax Act”).

    Cash flows from operating activities increased $211 million sequentially to $214 million primarily due to the collection of certain receivables, decreased income tax payments, insurance prepayments, and interest payments.

    Third quarter 2018 capital expenditures of $48 million were primarily related to the company’s newbuild drillships. This compares with $39 million in the previous quarter.

    “We continued to operate at a high level in the third quarter, with revenue efficiency again exceeding 95%, resulting in quarterly revenue of $816 million,” said Jeremy Thigpen, President and Chief Executive Officer. “We also delivered an industry-leading Adjusted Normalized EBITDA margin of 42% through the efficient conversion of our industry best $11.5 billion backlog.”

    Thigpen added, “We remain encouraged by the increase that we are experiencing in floater contracting activity. Over the past three months, as a testament to our fleet quality, operating performance and customer relationships, we secured almost $500 million of new backlog, bringing our 12-month total to over $1.5 billion.”

    Thigpen concluded, “In preparation for an offshore recovery, during the quarter, we also continued the high-grading of our fleet by announcing our agreement to acquire Ocean Rig. With its strong balance sheet, and fleet of 11 high-specification ultra-deepwater drillships, two of which are currently under construction, and two harsh environment semisubmersibles, Ocean Rig presents us with a unique opportunity to continue enhancing both our fleet and our optionality as the market recovery unfolds. We look forward to a favorable shareholder vote at our Extraordinary General Meeting scheduled for November 29, and to ultimately closing the transaction in December.”

    Further to the above referenced Ocean Rig acquisition, Mark Mey, Executive Vice President and Chief Financial Officer added, “Consistent with our objective of protecting near-term liquidity, last week we successfully issued $750 million of seven-year priority guaranteed notes replacing the committed Ocean Rig acquisition financing with permanent financing.”

    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 41 mobile offshore drilling units consisting of 23 ultra-deepwater floaters, 12 harsh environment floaters, two deepwater floaters and four midwater floaters. In addition, Transocean is constructing two ultra-deepwater drillships and one harsh environment semisubmersible in which the company holds a 33.0% interest.

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