During the second quarter of 2006, GlobalSantaFe recognized insurance recoveries totaling $66.4 million. This amount includes a book gain of $63.7 million, or 26 cents per diluted share, on two offshore drilling rigs, the GSF Adriatic VII and GSF High Island III, which were severely damaged during Hurricane Rita. Excluding this $63.7 million gain, net income for the quarter was $184.8 million, or 75 cents per diluted share.
For the six months ended June 30, 2006, GlobalSantaFe reported net income of $411.4 million, or $1.65 per diluted share, on revenues of $1.5 billion, compared with net income of $135.3 million, or 56 cents per diluted share, on revenues of $1.1 billion for the corresponding six-month period of 2005.
"GlobalSantaFe achieved record net income during the second quarter, despite the impact of some unscheduled downtime for repairs on several rigs. These repairs have been completed, and all of the affected rigs are back on dayrate," said GlobalSantaFe President and CEO Jon Marshall. "Looking ahead, we are encouraged by the ongoing strength in the international markets, as evidenced by the continuing rise in dayrates and increasing demand for long-term drilling contracts."
GlobalSantaFe continued to repurchase its ordinary shares during the second quarter under a $2 billion buyback program authorized by its board of directors on March 3, 2006. The company repurchased $515 million of its shares through the close of the second quarter, including $131 million purchased in March and $384 million purchased during the second quarter.
Second Quarter 2006 Analysis
The significant improvement in second quarter 2006 net income was primarily due to a 193 percent increase in operating income to $276.6 million from $94.5 million in the prior-year period. This improvement reflects higher contract drilling revenues from increased dayrates and continued high fleet utilization, which contributed to a 145 percent increase in contract drilling operating income to $216.7 million for the second quarter of 2006 from $88.4 million in the same quarter of 2005. Operating income for the second quarter of 2006 also includes the $66.4 million in insurance recoveries. Higher second quarter 2006 contract drilling revenues were partially offset by higher labor costs, repair and maintenance expense and other operating costs compared with the same period of 2005.
In the second quarter of 2006, average revenues per day from contract drilling increased 52 percent to $113,700 per rig from $74,900 in the second quarter of 2005. The company reported average fleet utilization of 95 percent in the second quarters of 2006 and 2005.
The combined drilling management services and oil and gas segments reported operating income of $14.1 million on revenues of $189.8 million for the second quarter of 2006, compared with operating income of $21.1 million on revenues of $171.0 million in the second quarter of 2005. The decline in operating income was primarily related to higher profit deferrals on turnkey drilling projects in which the company held a working interest, fewer North Sea projects due to limited rig availability and lower oil production. The segment reported a total of 28 turnkey projects during the second quarter of 2006, compared with 31 in the second quarter of 2005.
GlobalSantaFe is a leading provider of offshore oil and gas drilling and drilling management services. The company owns or operates a mobile fleet of marine drilling rigs that operates in major drilling regions around the world, including premium and heavy-duty, harsh-environment jackups, semisubmersibles, and dynamically positioned ultra-deepwater drillships.
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