Transocean Sedco Forex Report on 3rd Quarter Earnings



Transocean Sedco Forex Inc. announced that net income for the three months ended September 30, 2001 was $97.6 million, or $0.30 per diluted share, on revenues of $770.2 million. Net income for the quarter included a net after-tax gain totaling $7.5 million, or $0.02 per diluted share, resulting primarily from the sale of two Nigerian-based land rigs and the disposal of an inland drilling barge. Excluding the net after-tax gain, net income for the three months ended September 30, 2001 was $90.1 million, or $0.28 per diluted share. For the corresponding three months in 2000, net income was $49.3 million, or $0.23 per diluted share, and included a net after-tax gain of $7.1 million, or $0.03 per diluted share, resulting primarily from the sale of rigs, and partially offset by net charges resulting from adjustments to provisions for legal claims. In addition, results for the corresponding three months in 2000 included a net $1.4 million, or $0.01 per diluted share, extraordinary gain resulting from the early retirement of certain debt. Revenues for the three months ended September 30, 2000 were $314.5 million.

For the nine months ended September 30, 2001, net income was $196.6 million, or $0.63 per diluted share, on revenues of $2,072.5 million. The results included a net after-tax gain from the sale of assets totaling $23.5 million, or $0.07 per diluted share, substantially offset by a net $17.3 million, or $0.06 per diluted share, extraordinary loss relating to the early retirement of certain debt. Adjusting for the net after-tax gain and the extraordinary loss, net income for the nine months ended September 30, 2001 was $190.4 million, or $0.62 per diluted share. For the corresponding nine months in 2000, net income totaled $117.7 million, or $0.56 per diluted share, on revenues of $914.6 million.

Transocean Sedco Forex completed a merger transaction with R&B Falcon Corporation on January 31, 2001. Therefore, results for the nine months ended September 30, 2001 reflect only eight months of operating results of R&B Falcon Corporation. Pro Forma utilization measures noted below have been calculated based on the combined fleet of Transocean Sedco Forex and R&B Falcon for the nine months ended September 30, 2001 and the equivalent period during 2000.

Revenues from the company's International and U.S. Floater Contract Drilling Services business segment totaled $655.0 million, or 85% of total operating revenues during the three months ended September 30, 2001. The revenue level represented a 7% increase from the $613.6 million recorded during the three months ended June 30, 2001. Field operating income, defined as operating revenues less operating and maintenance expense, for this segment was $313.4 million, or 89% of total field operating income during the three months ended September 30, 2001. This was 9% better than field operating income of $287.2 million during the three months ended June 30, 2001. Fleet utilization for this segment during the three months ended September 30, 2001 was 81%, compared to 82% during the three months ended June 30, 2001. Pro forma fleet utilization during the three months ended September 30, 2000 was 82%. Average segment dayrates improved 6% during the three months ended September 30, 2001, to $86,600 from $82,000 during the three months ended June 30, 2001.

Revenues from the company's Gulf of Mexico Shallow and Inland Water business segment declined 17% during the three months ended September 30, 2001 to $115.2 million, or 15% of total operating revenues, compared to revenues of $138.6 million during the three months ended June 30, 2001. Segment field operating income was $38.6 million, or 11% of total field operating income for the three months ended September 30, 2001, compared to $70.7 million for the three months ended June 30, 2001. The 45% reduction in the segment's field operating income was due primarily to fleet utilization levels declining to 63% during the three months ended September 30, 2001 from 71% during the three months ended June 30, 2001. During the three months ended September 30, 2000, pro forma segment utilization was 58%. Dayrates in this segment averaged $30,000 during the three months ended September 30, 2001, a 6% decline from levels experienced during the three months ended June 30, 2001.

J. Michael Talbert, President and Chief Executive Officer of Transocean Sedco Forex Inc., stated, "Improving dayrates within our international fleet and the U.S.-based floating rigs helped offset the declining quarterly contribution from our Gulf of Mexico Shallow and Inland Water business segment, a situation created by weakening U.S. natural gas prices and constrained customer spending since July 2001. The prospects for a near-term recovery in this market appear limited, although I am encouraged by U.S. natural gas prices which have improved better than 70% from levels seen in late-September 2001. Improvement in U.S. natural gas prices, together with the well-documented decline in U.S. natural gas production levels, will be critical drivers of a recovery in the U.S. Gulf of Mexico shallow water drilling market. Meanwhile, drilling outside of the U.S. Gulf of Mexico shallow water drilling market remains reasonably stable, as evidenced by the company's contract signings over the past 60 days equating to an estimated 17 rig years and approximately $508 million in revenues. As of today, the company has approximately 51% of the available rig days associated with its International and U.S. Floater Contract Drilling Services business segment committed to firm contracts in 2002."

In closing, Talbert added, "While heightened economic uncertainty diminishes some business prospects in the near-term, we remain confident of the long-term fundamentals for our business, particularly in the deepwater arena. With the recent completion of our deepwater rig construction program, which added 15 new or converted ultra-deepwater floaters to our fleet since 1998, we are in a strong position to capture the opportunities that we expect to develop as deepwater drilling prospects expand around the world."