Transocean Reports 4Q10 Earnings



Transocean reported a net loss attributable to controlling interest for the three months ended December 31, 2010 of $799 million or $2.51 per diluted share. The results compare to net income attributable to controlling interest of $723 million, or $2.24 per diluted share for the three months ended December 31, 2009.

Fourth Quarter 2010

Fourth quarter 2010 results were adversely impacted by $1.017 billion of after tax items, or $3.19 per diluted share, which include:

  • An after-tax, non-cash charge of $1.010 billion, or $3.16 per diluted share. The charge resulted from an impairment of our Standard Jackup asset group. Calculated based on U.S. Generally Accepted Accounting Principles, the charge is due to a current and projected decline in dayrates and utilization that has adversely impacted this asset group.
  • a $13 million loss on retirement of debt associated with repurchases of a portion of our convertible senior notes, and
  • $6 million of income as a result of the TODCO tax sharing agreement and other matters.

Fourth quarter 2010 results also included expenses associated with the Macondo well incident of $28 million, or $25 million, after tax, or $0.08 per diluted share. These expenses include legal and internal investigation costs, professional fees and increased insurance premiums.

Full Year 2010

For the year ended December 31, 2010, net income attributable to controlling interest totaled $961 million, or $2.99 per diluted share. Net income for the year ended December 31, 2010 included after-tax charges of $854 million, or $2.65 per diluted share, resulting primarily from the $1.010 billion impairment of our Standard Jackups. Other charges for the full year totaled $111 million and included litigation matters, an impairment of oil and gas properties, a loss on the sale of two rigs and losses on the early retirement of debt and other matters. Partially offsetting these charges was a $267 million after-tax gain resulting from insurance recoveries associated with the loss of the Deepwater Horizon.

Full-year 2010 results also included additional expenses associated with the Macondo well incident of $137 million, or $116 million after tax, or $0.36 per diluted share. These expenses include legal costs, internal investigation costs, professional fees and increased insurance premiums.

For 2009, net income attributable to controlling interest was $3.181 billion, or $9.84 per diluted share. Net income for the year ended December 31, 2009 included after-tax charges of $498 million, or $1.55 per diluted share, resulting primarily from impairments of intangible assets and two rigs held for sale, litigation matters, losses on the early retirement of debt and adjustments associated with the GlobalSantaFe merger. These charges were partially offset by gains on the sale of our interest in a joint venture and settlements of certain tax matters.

Operations Quarterly Review

Revenues for the three months ended December 31, 2010 were $2.160 billion, compared to revenues of $2.309 billion during the three months ended September 30, 2010. The $149 million decrease was primarily due to:

  • $90 million of decreased utilization, primarily from rigs that were stacked or idled,
  • a $52 million charge related to a customer dispute in the U.S. Gulf of Mexico,
  • $41 million from increased shipyard activity,
  • $18 million of reduced revenue on completion of the GSF Arctic IV charter,
  • offset by $44 million due to increased drilling management services revenue, and
  • $8 million of other net favorable variances.

Operating and maintenance expenses totaled $1.352 billion for the fourth quarter 2010, up approximately 11 percent compared to $1.213 billion for the prior quarter. The $139 million quarter-to-quarter increase in operating and maintenance costs was primarily due to:

  • $73 million of increased shipyard and contract preparation costs,
  • $35 million of increased costs associated with drilling management services activity,
  • $34 million resulting from increased maintenance expense, offset by $3 million of net favorable variances.

General and administrative expenses were $67 million for the fourth quarter 2010 compared to $59 million in the previous quarter. The $8 million increase was due, in part, to increases in non-rig related insurance costs and other miscellaneous items.

Liquidity and Interest Expense

Interest expense, net of amounts capitalized for the fourth quarter 2010, was $152 million, compared to $142 million in the third quarter 2010, reflecting the full quarter impact of the issuance of $2 billion of new senior notes during the third quarter. Interest expense, for the full year 2010 net of amounts capitalized, was $567 million, compared to $484 million for the full year 2009. The increase in interest expense was mainly due to lower capitalized interest expense in 2010.

Cash flow from operating activities increased to $796 million for the fourth quarter 2010 compared to $709 million for the third quarter 2010. For the full year 2010, cash flow from operating activities totaled $3.946 billion compared to $5.598 billion for the full year 2009.

Effective Tax Rate

Transocean's Annual Effective Tax Rate(1), which excludes various discrete items, for the fourth quarter 2010 and the full year ended December 31, 2010 was a benefit of 18.7 percent and an expense of 13.8 percent, respectively. The Effective Tax Rate(2) for the fourth quarter 2010 and the full year ended December 31, 2010 was 4.1 percent and 23.9 percent, respectively. Transocean's Effective Tax Rate reflects the impact of changes in estimates as well as the impact of impairments. The decline in the Annual Effective Tax Rate for the full year 2010 was due to a tax benefit realized in the fourth quarter resulting primarily from the relocation of certain rigs.


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