The company noted that the offshore drilling industry continues to experience strong customer demand throughout most geographic regions as reflected by high asset utilization and a further rise in dayrates among most classes of offshore drilling rigs.
Within its fleet of 33 High-Specification Floaters, the company has had notable success in securing long-term contracts at attractive dayrates, contributing to an unprecedented level of visible activity towards the end of the decade. At present, 22 of the company's 33 High-Specification Floaters, in addition to a contract for the newbuild rig Discoverer Clear Leader and a second Sedco 700 Series semisubmersible rig upgrade, are contracted into or beyond 2009 with the High-Specification Floaters contributing an estimated $12 billion toward the company's total contract backlog at May 1, 2006 of approximately $17 billion. Demand for deepwater rigs with availability in the next 24 to 30 months continues to exceed supply, resulting in the delay of some drilling programs. In addition, a number of operators continue to express interest in newbuild deepwater rigs with anticipated delivery dates after 2008. At present, an estimated 3% of the company's High-Specification Floater fleet contract days for the remainder of 2006 are uncommitted, while approximately 15% are uncommitted in 2007 and approximately 21% are uncommitted in 2008.
Customer demand for the company's fleet of Other Floaters (mid-water units) comprised of 21 semisubmersible rigs, is strongest in Asia, the U.S. Gulf of Mexico and the North Sea. The company is seeing dayrates that are decidedly higher than those seen at the beginning of the year as evidenced by recent contract signings for the semisubmersible rigs Sedco 703 at $400,000 per day and the Transocean Legend at $435,000 per day. The company recently announced it has begun its third rig reactivation in the past 10 months following the award of a two-year contract for the semisubmersible rig C. Kirk Rhein, Jr. at $340,000 per day, providing further evidence of the improved state of the mid-water floater market sector. Presently, 11 of the company's 21 Other Floaters are expected to conclude existing contracts before the end of 2007 and then commence new contracts. The company continues to evaluate contract opportunities that could support the reactivation of the semisubmersible rig Transocean Wildcat. At present, an estimated 14% of the Other Floater fleet contract days for the remainder of 2006 are uncommitted, while approximately 41% are uncommitted in 2007 and approximately 74% are uncommitted in 2008.
The company's 25-rig Jackup fleet is experiencing strong customer demand in Asia and the Middle East, including multi-year contract opportunities available in India, Saudi Arabia, Qatar and Abu Dhabi. Dayrates for some standard jackup rigs have approached or exceeded $200,000 per day, as evidenced by recent contract signings for the Trident 9 at $189,500 per day and the Shelf Explorer at $212,200 per day. At present, approximately 3% of the company's Jackup fleet days are uncommitted for the remainder of 2006, while approximately 18% are uncommitted in 2007 and approximately 59% are uncommitted in 2008.
The company anticipates continued revenue growth for each of the remaining quarters in 2006, with more prominent growth expected during the second half of the year, supported by improving fleet activity and higher average dayrates. Revenue improvement during the second quarter of 2006 is expected to be more than offset by higher operating and maintenance expenses, which the company expects to peak during the second quarter, resulting primarily from increased fleet out-of-service time. A total of 15 rigs in the company's fleet are expected to be out-of-service for an estimated 670 days during the second quarter due to shipyard programs and mobilizations versus approximately 350 out-of-service days in the first quarter. Also, the company's reactivation efforts have expanded to three units with the recent contract award for the semisubmersible rig C. Kirk Rhein, Jr. These shipyard, mobilization and reactivation activities are expected to result in operating and maintenance costs that exceed the level of costs reported in the first quarter of 2006 by up to $75 million. Operating and maintenance expenses are expected to decline during the second half of 2006 as shipyard and reactivation activity decreases. However, the pace of decline could be slowed by the possibility of an additional reactivation, labor and maintenance inflationary cost pressures and the delay of second quarter shipyard programs to later periods, as the company experienced during the first quarter of 2006 with two shipyard programs.
Operations Quarterly Review
Revenues for the three months ended March 31, 2006 of $817.3 million were 6% higher than revenues reported for the final three months of 2005, which totaled $771.2 million. This increase in revenues was the result of increased activity, especially among the company's Fifth-Generation and Other Deepwater Floaters, and higher average dayrates, partially offset by rig out-of-service time. Several rigs returned to service during the first quarter of 2006 following out-of-service periods in the final quarter of 2005, including the semisubmersible rig Sedco Energy, drillship Peregrine I and jackup rig Shelf Explorer. Also, the semisubmersible rig Transocean Marianas returned to service during the final week of the first quarter of 2006 following the repair of damage sustained during the 2005 hurricane season. The rig, which was in a shipyard for all of the final quarter in 2005, is expected to be out-of-service for 30 days in August 2006 to complete an upgrade to its mooring system. Utilization of the company's fleet improved to 82% during the three months ended March 31, 2006 from 78% during the final three months of 2005. The average fleet dayrate increased to $119,600, up 6% from $113,300 during the final three months in 2005.
Operating income before general and administrative expenses totaled $304.8 million and field operating income (defined as revenues less operating and maintenance expenses) was $342.3 million for the three months ended March 31, 2006. Both measures of income increased from $207.2 million and $314.2 million, respectively, for the three months ended December 31, 2005. Operating and maintenance expenses in the first three months of 2006 increased 4% to $475 million from $457 million during the final three months of 2005, due principally to rig reactivation programs associated with the semisubmersible rigs Transocean Prospect, Transocean Winner and C. Kirk Rhein, Jr. which totaled approximately $19 million, and an estimated $8 million of expenses required for repairs to the Transocean Marianas. During the first quarter of 2006, scheduled shipyard programs on the semisubmersible rig Sedco 710 and the jackup rig J.T. Angel were postponed. Also, hurricane-related expenses were lower than expected, which together with the postponement of shipyard projects and certain rig maintenance programs contributed to operating and maintenance expenses that were lower than originally anticipated by management.
Effective Tax Rate
The company's effective tax rate(2) for the three months ended March 31, 2006 was 17.6%, excluding the previously mentioned effects on income before tax related to the gains from the sale of a platform rig and the drillship Peregrine III and excluding various discrete tax items. The actual effective tax rate of approximately 23% for the first quarter of 2006 reflects the tax impact of the rig sales as well as the impact of discrete tax items related to changes in estimates. The impact of these items in the first quarter of 2006 was an increase in the tax provision of approximately $25 million. The company currently expects the effective tax rate for the remainder of 2006 to be between 17% and 18%, excluding the previously mentioned effects on income before tax related to the gains from rig sales and excluding various discrete tax items.
During the three months ended March 31, 2006, the company repurchased $200 million of its ordinary shares, or 2,578,500 shares at an average price of $77.54 per share, pursuant to the $2 billion share repurchase program that was authorized by the company's Board of Directors in October 2005. At May 4, 2006, after all prior repurchases under the program, the company still had authority to repurchase up to an additional $1.4 billion of its ordinary shares under the original terms of the share repurchase program.
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