Transocean Ltd. on Wednesday reported net income attributable to controlling interest of $310 million, or $0.96 per diluted share, for the three months ended March 31, 2011. The results compare to net income attributable to controlling interest of $677 million, or $2.09 per diluted share for the three months ended March 31, 2010.
First quarter 2011 results included the following items, after tax, that resulted in a net positive impact of approximately $139 million, or $0.43 per diluted share:
-- $176 million of income from discontinued operations, nearly all of which is from the gain on the sale of the Trident 20, -- $9 million from the gain on the sale of the Transocean Mercury, -- $8 million of net charges related to litigation matters not associated with the Macondo well incident, and -- $38 million of net charges primarily related to discrete tax items.
First quarter 2011 results also included expenses associated with the Macondo well incident of $23 million, $19 million after tax, or $0.06 per diluted share. These expenses were primarily related to increased insurance premiums and legal costs.
Operations Quarterly Review
Revenues for the three months ended March 31, 2011 were $2.144 billion, compared to revenues of $2.127 billion during the three months ended December 31, 2010. First quarter contract drilling revenues were impacted by lower utilization and revenue efficiency. Our Deepwater and Midwater Floater fleets experienced lower utilization due to the stacking of rigs, as well as increased shipyard time related to contract preparation, special periodic surveys and major maintenance projects. Compliance with new well control equipment certification requirements, higher standards for equipment condition and capacity constraints on our vendors contributed to reduced revenue efficiency among our Ultra-Deepwater and Deepwater Floaters. Partially offsetting lower contract drilling revenue was additional revenue from two newbuild rigs commencing operations. Other revenues increased primarily from additional drilling management services activity.
Operating and maintenance expenses totaled $1.359 billion for the first quarter 2011, up slightly from $1.339 billion for the prior quarter. The change was due to increased drilling management services activity, which was partially offset by reduced rig-related maintenance costs.
Depreciation and amortization expense was $354 million in the first quarter 2011 compared to $381 million in the prior quarter. The $27 million decrease was primarily due to the reduced carrying amounts of our Standard Jackups resulting from the approximately $1 billion asset impairment recognized on that asset group during the fourth quarter 2010.
Liquidity and Interest Expense
Interest expense, net of amounts capitalized for the first quarter 2011, was $145 million, compared to $152 million in the fourth quarter 2010.
Cash flow from operating activities decreased to $390 million for the first quarter 2011 compared to $796 million for the fourth quarter 2010. The decline in cash flow from operations resulted primarily from an increase in working capital.
Effective Tax Rate
Transocean's Annual Effective Tax Rate(1) for the first quarter 2011, which excludes various discrete items, was 19.3 percent. The Effective Tax Rate(2) for the first quarter was 33.1 percent, primarily reflecting the impact of discrete items resulting from changes in estimates.
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