Message #2 From:
Stock News Bot Date: August 3, 2006 04:27:00 AM
RIG News Transocean Inc. Reports Second Quarter 2006 Results, Announces Repurchase of $800 Million of Shares
HOUSTON--(BUSINESS WIRE)--Aug. 3, 2006--Transocean Inc. (NYSE:RIG) today reported net income for the three months ended June 30, 2006 of $249.5 million, or $0.75 per diluted share, on revenues of $853.3 million. The results compare to net income of $301.8 million, or $0.90 per diluted share, on revenues of $727.4 million for the corresponding three months in 2005. Net income for the three months ended June 30, 2006 included after-tax gains totaling $110.7 million, or $0.33 per diluted share, resulting from the sale of the semisubmersible rig Transocean Explorer, idle since January 1999, and the drilling barge Searex XII. Net income for the corresponding three months in 2005 included after-tax gains of $165.0 million, or $0.49 per diluted share, resulting from the sale of TODCO common stock and $9.1 million, or $0.03 per diluted share, resulting from the sale of two rigs.
For the six months ended June 30, 2006, net income totaled $455.2 million, or $1.36 per diluted share, on revenues of $1,670.6 million, compared to net income of $393.6 million, or $1.18 per diluted share, on revenues of $1,357.9 million for the six months ended June 30, 2005. Net income for the six months ended June 30, 2006 included after-tax gains totaling $153.6 million, or $0.46 per diluted share, resulting from the sale of the Transocean Explorer, Searex XII, the drillship Peregrine III and a platform rig. Net income for the corresponding six months in 2005 included the previously mentioned gain from the sale of TODCO common stock, after-tax gains of $27.9 million, or $0.08 per share, resulting from the sale of three rigs and a loss of $6.7 million, or $0.02 per diluted share, resulting from the early retirement of debt.
During the three months ended June 30, 2006, the company repurchased and retired $400 million of its ordinary shares, or 5.2 million shares at an average price of $76.23 per share, pursuant to the share repurchase program that was initially authorized by the company's Board of Directors in October 2005 at $2.0 billion and increased in May 2006 to $4.0 billion. During July 2006, the company repurchased and retired an additional $400 million of its ordinary shares, or 5.2 million shares at an average price of $77.00 per share. At July 31, 2006, the company had repurchased and retired a total of $1.4 billion of its ordinary shares, or 19.0 million shares at an average price of $73.54 per share, and still had authority to repurchase up to an additional $2.6 billion of its ordinary shares under the terms of the share repurchase program.
Robert L. Long, President and Chief Executive Officer of Transocean Inc., stated, "Financial results for the second quarter and first six months of 2006 were at levels consistent with our previous guidance. The growth in revenues reflects the excellent contract signings seen over the past 18 months, partially offset by increased fleet out-of-service time and higher operating and maintenance expenses, including the costs associated with three rig reactivations. The second half of 2006 is expected to see additional improvement in financial results as revenues continue to grow. Operating revenues for each of the third and fourth quarters of 2006 are expected to be at record levels with the fourth quarter exceeding $1.0 billion for the first time in the company's history, while operating and maintenance expenses for each of the third and fourth quarters of 2006 are expected to approximate the level of expenses reported for the second quarter of 2006. With strong demand for our fleet of mobile offshore drilling rigs in both the domestic and international market sectors, the company's contract backlog has grown to approximately $19.4 billion at July 31, 2006, up from approximately $10.9 billion at December 31, 2005."
Operations Quarterly Review
Revenues for the three months ended June 30, 2006 increased 4% to $853.3 million, compared to revenues of $817.3 million during the three months ended March 31, 2006. The revenue improvement was primarily attributable to higher dayrates experienced throughout the fleet. The semisubmersible rig Transocean Marianas completed its first full quarter of operation since sustaining damage in September 2005 during Hurricane Rita and the semisubmersible rig Jim Cunningham and jackup rig Trident IV experienced improved utilization in the second quarter of 2006 following mobilizations to new regions during the first quarter of 2006. The improvement in revenues was partially offset by planned out-of-service time on 13 rigs, and in the case of the drillship Deepwater Frontier, mobilization of the rig from Brazil to India ahead of the commencement of a multi-year contract. The out-of-service time contributed to a slight decline in fleet utilization during the three months ended June 30, 2006 to 81% from 82% during the first quarter of 2006. Over the same comparative period, the average fleet dayrate improved 8% to an average of $129,000 from an average of $119,600, due chiefly to 12% and 7% improvements in average dayrates among the company's High-Specification and Other Floaters fleets, respectively.
Operating income before general and administrative expenses totaled $312.6 million, and field operating income (defined as revenues less operating and maintenance expenses) was $304.0 million for the three months ended June 30, 2006. The results compare to operating income before general and administrative expenses and field operating income of $304.8 million and $342.3 million, respectively, during the three months ended March 31, 2006. The decline in field operating income was primarily attributable to an increase in operating and maintenance expenses during the second quarter of 2006, which totaled $549.3 million compared to $475.0 million in the first quarter of 2006. Approximately $20 million of the increase in operating and maintenance expenses, compared to the first quarter of 2006, related to the continuation of reactivation programs on the semisubmersible rigs Transocean Prospect, Transocean Winner and C.K. Rhein, Jr. Another $45 million was associated with shipyard programs on 13 rigs, as well as an increase in major maintenance projects on a number of active rigs. A weak U.S. dollar and increases in the cost for rig supplies, personnel and insurance contributed further to this increase in operating and maintenance expenses in the second quarter of 2006.
Liquidity
Cash flow from operations totaled $443.8 million for the six months ended June 30, 2006. Total debt at June 30, 2006 was $1,596.0 million, effectively level with total debt reported at March 31, 2006. Although the company had not drawn against its $1.0 billion revolving credit facility at June 30, 2006, approximately $360 million was drawn against the facility at July 31, 2006, with the primary use of the proceeds to fund rig construction programs and the repurchase of company ordinary shares.
Conference Call Information
Transocean will conduct a teleconference call at 10:00 a.m. Eastern DST on August 3, 2006. To participate, dial 913-981-5592 and refer to confirmation code 5208498 approximately five to 10 minutes prior to the scheduled start time of the call.
In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto the company's website at www.deepwater.com and selecting "Investor Relations." It may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company's New York Stock Exchange trading symbol, "RIG."
A telephonic replay of the conference call should be available after 1:00 p.m. Eastern DST on August 3, 2006 and can be accessed by dialing 719-457-0820 and referring to the passcode 5208498. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.
Analyst Meeting
In addition, the senior management of Transocean will discuss the company's strategic focus and regional business outlook during an analyst meeting in New York City on August 7, 2006. The meeting will be held in the Trianon Ballroom of the Hilton New York beginning at 9:00 a.m. Eastern DST. Those wishing to attend the meeting should notify Leslie Milner at 713-232-7694 or lmilner@houston.deepwater.com.
Forward-Looking Disclaimer
Statements regarding financial results, operating revenues, operating and maintenance expenses, as well as any other statements that are not historical facts in this release, are forward-looking statements that involve certain risks, uncertainties and assumptions. These include but are not limited to operating hazards and delays, risks associated with international operations, future financial results, actions by customers and other third parties, factors affecting the supply of drilling rigs, including newbuilds, reactivations and the reallocation of current rigs, factors affecting the duration of contracts including well-in-progress provisions, the actual amount of downtime, factors resulting in reduced applicable dayrates, hurricanes and other weather conditions, the future price of oil and gas and other factors detailed in the company's most recent Form 10-K and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
Transocean Inc. is the world's largest offshore drilling contractor with a fleet of 87 mobile offshore drilling units. The company's mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, 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. The company's fleet consists of 33 High-Specification Floaters (semisubmersibles and drillships), 20 Other Floaters, 25 Jackups and other assets utilized in the support of offshore drilling activities worldwide. With a current equity market capitalization in excess of $25 billion, Transocean Inc.'s ordinary shares are traded on the New York Stock Exchange under the symbol "RIG."
(1) For a reconciliation of segment operating income before general and administrative expense to field operating income, see the accompanying schedule titled Non-GAAP Financial Measures and Reconciliations - Operating Income Before General and Administrative Expense to Field Operating Income by Segment.
(2) References to effective tax rate are based on the Effective Tax Rate as shown in the accompanying schedule titled Effective Tax Rate Analysis.
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Operating Revenues
Contract drilling revenues $828.1 $682.1 $1,607.0 $1,282.7
Other revenues 25.2 45.3 63.6 75.2
----------------------------------------------------------------------
853.3 727.4 1,670.6 1,357.9
----------------------------------------------------------------------
Costs and Expenses
Operating and maintenance 549.3 437.0 1,024.3 825.3
Depreciation 102.0 101.2 203.6 201.9
General and administrative 24.6 18.0 44.8 36.1
----------------------------------------------------------------------
675.9 556.2 1,272.7 1,063.3
----------------------------------------------------------------------
Gain from disposal of assets,
net 110.6 13.6 174.7 33.5
----------------------------------------------------------------------
Operating Income 288.0 184.8 572.6 328.1
----------------------------------------------------------------------
Other Income (Expense), net
Equity in earnings of
unconsolidated affiliates 3.4 3.4 2.9 6.5
Interest income 5.3 4.8 10.5 8.8
Interest expense, net of
amounts capitalized (20.4) (29.8) (44.3) (62.9)
Gain from TODCO stock sales - 165.0 - 165.0
Loss on retirement of debt - - - (6.7)
Other, net (0.9) (3.0) (0.2) (4.1)
----------------------------------------------------------------------
(12.6) 140.4 (31.1) 106.6
----------------------------------------------------------------------
Income Before Income Taxes and
Minority Interest 275.4 325.2 541.5 434.7
Income Tax Expense 25.9 23.6 86.3 41.1
Minority Interest - (0.2) - -
----------------------------------------------------------------------
Net Income $249.5 $301.8 $455.2 $393.6
======================================================================
Earnings Per Share
Basic $0.77 $0.93 $1.40 $1.21
Diluted $0.75 $0.90 $1.36 $1.18
======================================================================
Weighted Average Shares
Outstanding
Basic 323.6 326.1 324.5 324.8
----------------------------------------------------------------------
Diluted 335.8 338.0 337.0 336.9
----------------------------------------------------------------------
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
June 30, December 31,
2006 2005
------------ ------------
(Unaudited)
ASSETS
Cash and Cash Equivalents $282.2 $445.4
Accounts Receivable, net of allowance for
doubtful accounts of $19.1 and $15.3 at
June 30, 2006 and December 31, 2005,
respectively 703.6 599.7
Materials and Supplies, net of allowance for
obsolescence of $16.1 and $19.1 at June 30,
2006 and December 31, 2005, respectively 164.2 156.2
Deferred Income Taxes, net 24.7 23.4
Other Current Assets 74.6 54.4
----------------------------------------------------------------------
Total Current Assets 1,249.3 1,279.1
----------------------------------------------------------------------
Property and Equipment 10,018.5 9,791.0
Less Accumulated Depreciation 3,199.6 3,042.8
----------------------------------------------------------------------
Property and Equipment, net 6,818.9 6,748.2
----------------------------------------------------------------------
Goodwill 2,208.9 2,208.9
Investments in and Advances to
Unconsolidated Affiliates 11.0 8.1
Other Assets 266.9 212.9
----------------------------------------------------------------------
Total Assets $10,555.0 $10,457.2
======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable $337.4 $254.0
Accrued Income Taxes 18.9 27.5
Debt Due Within One Year 95.4 400.0
Other Current Liabilities 259.7 242.1
----------------------------------------------------------------------
Total Current Liabilities 711.4 923.6
----------------------------------------------------------------------
Long-Term Debt 1,500.6 1,197.1
Deferred Income Taxes, net 112.1 65.0
Other Long-Term Liabilities 323.5 286.2
----------------------------------------------------------------------
Total Long-Term Liabilities 1,936.2 1,548.3
----------------------------------------------------------------------
Commitments and Contingencies
Minority Interest 3.8 3.6
Preference Shares, $0.10 par value;
50,000,000 shares authorized, none issued
and outstanding - -
Ordinary Shares, $0.01 par value;
800,000,000 shares authorized, 319,904,208
and 324,750,166 shares issued and
outstanding at June 30, 2006 and December
31, 2005, respectively 3.2 3.2
Additional Paid-in Capital 10,032.1 10,565.3
Accumulated Other Comprehensive Loss (20.5) (20.4)
Retained Deficit (2,111.2) (2,566.4)
----------------------------------------------------------------------
Total Shareholders' Equity 7,903.6 7,981.7
----------------------------------------------------------------------
Total Liabilities and Shareholders'
Equity $10,555.0 $10,457.2
======================================================================
TRANSOCEAN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Cash Flows from Operating
Activities
Net income $249.5 $301.8 $455.2 $393.6
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation 102.0 101.2 203.6 201.9
Stock-based compensation
expense 5.2 3.1 8.0 6.2
Deferred income taxes (8.6) (2.4) 25.4 2.2
Equity in earnings of
unconsolidated
affiliates (3.4) (3.4) (2.9) (6.5)
Net gain from disposal of
assets (110.6) (13.6) (174.7) (33.5)
Gain from TODCO stock
sales - (165.0) - (165.0)
Loss on retirement of
debt - - - 6.7
Amortization of debt-
related
discounts/premiums, fair
value adjustments and
issue costs, net (0.3) (2.3) (0.6) (5.5)
Deferred income, net 10.8 2.1 20.0 12.1
Deferred expenses, net (46.9) 10.3 (54.5) 9.1
Tax benefit from exercise
of stock options to
purchase and vesting of
ordinary shares under
stock-based compensation
plans (7.9) 5.7 (7.9) 4.9
Other, net 16.7 4.9 25.0 13.7
Changes in operating
assets and liabilities
Accounts receivable (32.7) (79.6) (103.9) (119.6)
Accounts payable and
other current
liabilities 46.1 55.4 90.5 70.8
Income taxes
receivable/payable,
net 5.9 12.2 11.6 7.1
Other current assets (49.9) (24.2) (51.0) (20.1)
------------------------------ ---------------------------------------
Net Cash Provided by Operating
Activities 175.9 206.2 443.8 378.1
------------------------------ ---------------------------------------
Cash Flows from Investing
Activities
Capital expenditures (98.0) (78.4) (275.6) (109.6)
Proceeds from disposal of
assets, net 121.3 25.0 203.0 58.0
Proceeds from TODCO stock
sales, net - 271.9 - 271.9
Joint ventures and other
investments, net - 1.4 - 4.5
------------------------------ ---------------------------------------
Net Cash Provided by (Used in)
Investing Activities 23.3 219.9 (72.6) 224.8
------------------------------ ---------------------------------------
Cash Flows from Financing
Activities
Repayments of debt - (7.9) - (287.8)
Net proceeds from issuance
of ordinary shares under
stock-based compensation
plans 21.6 87.0 66.1 159.4
Proceeds from issuance of
ordinary shares upon
exercise of warrants - 4.6 - 4.6
Repurchase of ordinary
shares (400.1) - (600.1) -
Decrease in cash dedicated
to debt service - 12.0 - 12.0
Other, net (0.4) - (0.4) 0.1
------------------------------ ---------------------------------------
Net Cash Provided by (Used in)
Financing Activities (378.9) 95.7 (534.4) (111.7)
------------------------------ ---------------------------------------
Net Increase (Decrease) in
Cash and Cash Equivalents (179.7) 521.8 (163.2) 491.2
------------------------------ ---------------------------------------
Cash and Cash Equivalents at
Beginning of Period 461.9 420.7 445.4 451.3
------------------------------ ---------------------------------------
Cash and Cash Equivalents at
End of Period $282.2 $942.5 $282.2 $942.5
============================== =======================================
Transocean Inc.
Fleet Operating Statistics
Operating Revenues
($ Millions) (1)
------------------------------
Three Months Ended
------------------------------
June 30, March 31, June 30,
Transocean Drilling Segment: 2006 2006 2005
--------- ---------- ---------
Contract Drilling Revenues
High-Specification Floaters:
Fifth-Generation Deepwater
Floaters $227.8 $225.6 $213.8
Other Deepwater Floaters $193.8 $171.7 $145.7
Other High-Specification
Floaters $62.5 $51.0 $56.0
Total High-Specification Floaters $484.1 $448.3 $415.5
Other Floaters $167.4 $166.0 $114.2
Jackups $155.1 $143.6 $128.3
Other Rigs $21.5 $21.0 $24.1
Subtotal $828.1 $778.9 $682.1
Other Revenues
Client Reimbursable Revenues $21.8 $24.7 $25.0
Integrated Services and Other $3.4 $13.7 $20.3
Subtotal $25.2 $38.4 $45.3
Total Company $853.3 $817.3 $727.4
Average Daily Revenue (1)
------------------------------
Three Months Ended
------------------------------
June 30, March 31, June 30,
Transocean Drilling Segment: 2006 2006 2005
--------- ---------- ---------
High-Specification Floaters:
Fifth-Generation Deepwater
Floaters $216,500 $209,000 $197,100
Other Deepwater Floaters $190,200 $154,000 $132,700
Other High-Specification
Floaters $174,700 $158,800 $170,500
Total High-Specification Floaters $199,300 $178,200 $165,500
Other Floaters $118,200 $110,000 $82,400
Jackups $73,000 $70,300 $58,200
Other Rigs $47,500 $47,300 $47,000
Total Drilling Fleet $129,000 $119,600 $103,100
Utilization (1)
------------------------------
Three Months Ended
------------------------------
June 30, March 31, June 30,
Transocean Drilling Segment: 2006 2006 2005
--------- ---------- ---------
High-Specification Floaters:
Fifth-Generation Deepwater
Floaters 89% 92% 92%
Other Deepwater Floaters 70% 83% 80%
Other High-Specification
Floaters 98% 89% 90%
Total High-Specification Floaters 81% 87% 86%
Other Floaters 74% 73% 63%
Jackups 93% 91% 94%
Other Rigs 62% 58% 57%
Total Drilling Fleet 81% 82% 79%
(1) Average daily revenue is defined as contract drilling revenue
earned per revenue earning day in the period. A revenue earning
day is defined as a day for which a rig earns dayrate after
commencement of operations. Utilization is defined as the total
actual number of revenue earning days in the period as a
percentage of the total number of calendar days in the period for
all drilling rigs in our fleet.
Transocean Inc. and Subsidiaries
Non-GAAP Financial Measures and Reconciliations
Operating Income Before General and Administrative Expense
to Field Operating Income by Segment
(in US$ millions)
Three Months Ended Six Months Ended
------------------------------ -------------------
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
--------- ---------- --------- --------- ---------
Transocean
Drilling
Segment
Operating
revenue $853.3 $817.3 $727.4 $1,670.6 $1,357.9
Operating and
maintenance
expense (1) 549.3 475.0 437.0 1,024.3 825.3
Depreciation 102.0 101.6 101.2 203.6 201.9
Gain from
disposal of
assets, net (110.6) (64.1) (13.6) (174.7) (33.5)
--------- ---------- --------- --------- ---------
Operating income
before general
and
administrative
expense 312.6 304.8 202.8 617.4 364.2
Add back
(subtract):
Depreciation 102.0 101.6 101.2 203.6 201.9
Gain from
disposal of
assets, net
(1) (110.6) (64.1) (13.6) (174.7) (33.5)
--------- ---------- --------- --------- ---------
Field
operating
income $304.0 $342.3 $290.4 $646.3 $532.6
--------- ---------- --------- --------- ---------
(1) Loss on retirement for Q2 05 and YTD Q2 05 of $0.3 million and
$2.2 million, respectively, was reclassed out of operating and
maintenance expense and into gain from disposal of assets, net.
Transocean Inc. and Subsidiaries
Effective Tax Rate Analysis
(in US$ millions)
Three Months Ended Six Months Ended
----------------------------- -------------------
June 30, March 31, June 30, June 30,
2006 2006 2005 2006 2005
--------- --------- --------- --------- ---------
Income (Loss) before
Income Taxes and
Minority Interest $275.4 $266.1 $325.2 $541.5 $434.7
Add back
(subtract):
Loss on
retirement of
debt - - - - 6.7
Gain on sale of
assets (110.6) (64.6) (14.0) (175.2) (32.8)
Gain on TODCO
stock sales - - (165.0) - (165.0)
--------- --------- --------- --------- ---------
Adjusted Income
before Income Taxes
and Minority
Interest $164.8 $201.5 $146.2 $366.3 $243.6
Income Tax Expense $25.9 $60.4 $23.6 $86.3 $41.1
Add back
(subtract): -
Gain on sale of
assets 0.1 (21.7) (4.8) (21.6) (4.8)
Changes in
estimates (1) 3.4 (3.2) 7.8 0.2 5.6
--------- --------- --------- --------- ---------
Adjusted Income Tax
Expense (2) $29.4 $35.5 $26.6 $64.9 $41.9
Tax Rate 9.4% 22.7% 7.3% 15.9% 9.5%
Effective Tax Rate 17.8% 17.6% 18.2% 17.7% 17.2%
(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 June 30, 2005 include 1.4 million of
additional tax expense reflecting the catch-up effect of an
increase in the annual effective tax rate.
