For the nine months ended September 30, 2006, net income was $764.2 million, or $2.31 per diluted share, on revenues of $2,696.3 million, compared to net income for the nine months ended September 30, 2005 of $564.0 million, or $1.68 per diluted share, on revenues of $2,120.5 million. Net income for the nine months ended September 30, 2006 included after-tax gains totaling $194.4 million, or $0.58 per diluted share, resulting from the sale of non-strategic assets, including the two above-mentioned rigs. Net income for the nine months ended September 30, 2005 included a gain of $165.0 million, or $0.49 per diluted share, resulting from the sale of TODCO common stock, after-tax gains of $27.9 million, or $0.08 per diluted share, resulting from the sale of three rigs, and a loss of $6.7 million, or $0.02 per diluted share, resulting from the early retirement of debt.
During the three months ended September 30, 2006, the company repurchased $1.75 billion of its ordinary shares, or 24.4 million shares, at an average price of $71.67 per share, pursuant to the share repurchase program that was initially authorized by its Board of Directors in October 2005 at $2.0 billion and increased in May 2006 to $4.0 billion. During October 2006, the company repurchased an additional $250.0 million of its ordinary shares under the program, or 3.5 million shares, at an average price of $71.79 per share. At October 31, 2006, the company had repurchased a total of $3.0 billion of its ordinary shares under the program, or 41.7 million shares, at an average price of $71.87 per share and still had the authority to repurchase up to an additional $1.0 billion of its ordinary shares under the terms of the share repurchase program. Ordinary shares issued and outstanding at October 27, 2006 were approximately 292.4 million.
Robert L. Long, Chief Executive Officer of Transocean Inc., stated, "The company achieved record quarterly revenues and near-record quarterly net income, after adjusting for gains resulting from asset sales, during the third quarter of 2006. Revenue growth from the second quarter of 2006 was due primarily to higher average dayrates and improved utilization on a number of rigs. Operating costs for the quarter were below the high end of our expectations due in part to the postponement of rig maintenance and shipyard programs until the final quarter of the year. Although the postponement of shipyards may cause operating and maintenance costs in the fourth quarter to exceed our previous guidance of $515 million to $535 million, aggregate costs for the second half of 2006 are expected to be within our previously stated expectations.
"As we near the completion of 2006 and look to 2007, the company's record contract backlog, which has grown to an estimated $20.2 billion at October 31, 2006, should support prospects for further quarterly financial improvement. We remain optimistic regarding the prospects for our business, as rig demand continues to outpace supply, especially in the deepwater sector. New rig construction opportunities with multi-year contract durations support our belief that the deepwater sector should remain strong well into the future."
Operations Quarterly Review
Revenues for the three months ended September 30, 2006 increased 20% to $1,025.7 million compared to revenues of $853.3 million during the three months ended June 30, 2006. The revenue increase was due primarily to an improvement in average daily revenue, which rose 14% to $146,900 from $129,000 over the same comparative period. This improvement was consistent across the company's fleet as several rigs commenced new contracts with dayrates that reflect the strong business environment prevalent since mid-2004. In addition, third quarter 2006 revenues were enhanced by reduced out-of-service time, as rigs like the drillship Deepwater Frontier and semisubmersible rig Transocean Richardson, both down for much of the second quarter of 2006, experienced higher utilization following the completion of maintenance programs and, in the case of the Deepwater Frontier, a mobilization from Brazil to India. Finally, increased activity was seen during the third quarter of 2006 as the semisubmersible rigs Transocean Winner and Transocean Prospect commenced contracts following lengthy reactivation programs. The return to active service of these two reactivated rigs helped to drive the average third quarter 2006 fleet utilization to 87%, up from 81% during the second quarter of 2006.
For the three months ended September 30, 2006, operating income before general and administrative expenses totaled $413.2 million, a 32% improvement from $312.6 million reported during the second quarter of 2006. Field operating income (defined as revenues less operating and maintenance expenses) improved 53% to $464.8 million compared to $304.0 million over the same comparative period. The improved third quarter 2006 results were due chiefly to the strong revenue growth, partially offset by a 2% increase in operating and maintenance expenses, which totaled $560.9 million during the third quarter of 2006 compared to $549.3 million during the previous quarter in 2006. The increase in operating and maintenance expenses was due primarily to higher rig activity following the return of the Transocean Winner and Transocean Prospect to active status and fewer shipyard programs and mobilizations. Third quarter 2006 operating and maintenance expenses included $31.4 million pertaining to the reactivation of the Winner, Prospect and C.K. Rhein, Jr., compared to $39.2 million in the second quarter of 2006. Completion of the C.K. Rhein, Jr. reactivation project is expected during January 2007, while the commencement of a two-year contract is expected in February 2007 following mobilization of the rig to India.
Cash flow from operations increased to $732.2 million for the nine months ended September 30, 2006. The company reported an increase in total debt of approximately $1.9 billion, to $3,495.4 million at September 30, 2006 compared to total debt at June 30, 2006 of $1,596.0 million, resulting from the issuance in September 2006 of $1.0 billion principal amount of two-year floating rate notes and $900 million drawn on an up to $1.0 billion multi-draw term credit facility. During October 2006, the company drew a final $100 million available on the term credit facility. Net proceeds from the debt issuance were used to completely repay $640 million of the outstanding borrowings under the company's existing $1.0 billion, five-year revolving credit facility and the repurchase of company ordinary shares.
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