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Transocean (RIG) Beats Q1 Earnings and Revenue Estimates

Zacks Equity Research
Updated

Offshore drilling giant Transocean Ltd. RIG reported better-than-expected first-quarter 2016 results on a significant decline in operating and maintenance expenses. The expense reduction resulted from the company’s cost-cutting measures to withstand weak drillship demand owing to a persistent weakness in commodity prices. The positives were partially offset by a lower fleet utilization rate.

Earnings per share (excluding special items) of 69 cents came in above the Zacks Consensus Estimate of 26 cents. However, the bottom line decreased from the year-ago adjusted earnings of $1.10 per share. 

Quarterly total revenue of $1,341 million beat the Zacks Consensus Estimate of $1,098 million. The top line, however, decreased from the year-ago quarter figure of $2,043 million.    

Transocean's high-spec floaters contributed about 66.1% to the total revenue, while mid-water floaters and high-spec jackup rigs accounted for approximately 10.3% and 6.1%, respectively. The remaining was generated from rig activities, integrated services and others. 

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Operating Statistics

Transocean’s operating income came in at $414 million. The company had recorded a loss of $321 million in first-quarter 2015.  

Most importantly, total operating and maintenance expenses decreased 38.7% year over year to $665 million. Reduced activity levels, along with Transocean’s measures to lower expenses related to onshore and offshore operations, led to the decline in cost.  

Dayrates and Utilization

Total average dayrates decreased to $395,400 in the quarter under review from $398,100 in the year-earlier quarter. Significantly lower dayrates from harsh environment and ultra-deepwater floaters led to the decline.  

Overall fleet utilization was 51%, down from the year-ago utilization rate of 79%.    

Capital Expenditure & Balance Sheet

Capital expenditures during the quarter totaled $368 million. As of Mar 31, 2016, Transocean had cash and cash equivalents of $2,574 million and long-term debt of $7,253 million (representing a debt-to-capitalization ratio of approximately 36%. 

Zacks Rank

Switzerland-based Transocean currently carries a Zacks Rank #3 (Hold). Some better-ranked players from the same space include Diamond Offshore Drilling Inc. DO, North Atlantic Drilling Limited NADL and Seadrill Partners LLC SDLP. While Seadrill Partners sports a Zacks Rank #1 (Strong Buy), both Diamond Offshore Drilling and North Atlantic Drilling hold a Zacks Rank #2 (Buy).

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TRANSOCEAN LTD (RIG): Free Stock Analysis Report
 
DIAMOND OFFSHOR (DO): Free Stock Analysis Report
 
NORTH ATL DRILG (NADL): Free Stock Analysis Report
 
SEADRILL PTNRS (SDLP): Free Stock Analysis Report
 
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