Transocean Reports Fourth Quarter and Full-Year 2006 Results
Transocean Inc. (NYSE:RIG) reported net income for the three months ended December 31, 2006 of $621 million, or $2.05 per diluted share, on record quarterly revenues of $1,186 million. The results compare to net income of $152 million, or $0.45 per diluted share, on revenues of $771 million, for the three months ended December 31, 2005. Net income for the three months ended December 31, 2006 included after-tax gains of $192 million, or $0.63 per diluted share, resulting primarily from the sale of two rigs, the Transocean Wildcat and the Searex IX, and other income of $51 million, or $0.17 per share, that we recognized from our tax sharing agreement with TODCO in 2006.
For the 12 months ended December 31, 2006, net income totaled $1,385 million, or $4.28 per diluted share, on revenues of $3,882 million, compared to net income of $716 million, or $2.13 per diluted share, on revenues of $2,892 million for the corresponding 12 months in 2005. Net income for the 12 months ended December 31, 2006 included after-tax gains totaling $437 million, or $1.34 per share, resulting from the sale of non-strategic assets, including the two above-mentioned rigs, and income that we recognized from the tax sharing agreement with TODCO in 2006. Net income for the 12 months ended December 31, 2005 included a gain of $165 million, or $0.49 per diluted share, resulting from the sale of TODCO common stock, after-tax gains of $28 million, or $0.08 per diluted share, resulting from the sale of three rigs, other income of $11 million, or $0.03 per diluted share, earned from our tax sharing agreement with TODCO, and a loss of $7 million, or $0.02 per diluted share, resulting from the early retirement of debt.
Robert L. Long, Chief Executive Officer of Transocean Inc., stated, "We had a good quarter with revenues up 16% breaking the prior quarter's record revenues and with costs up less than 2% from the prior quarter. We are entering 2007 with a record contract backlog and a continuation of the excellent market conditions that we saw in 2006."
Operations Quarterly Review
Revenues for the three months ended December 31, 2006 increased to $1,186 million compared to revenues of $1,025 million during the three months ended September 30, 2006. The increase was primarily due to an improvement in average daily revenue, which rose 17% to $171,700 from $146,900 during the three months ended September 30, 2006. 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, fourth quarter 2006 revenues were enhanced by the return to operation of the semisubmersible rig Sedco 709 and the drillship Deepwater Discovery which were both idle for maintenance programs during the third quarter of 2006 and by a full quarter of activity of the semisubmersible rigs Transocean Winner and Transocean Prospect after they completed their reactivation programs in the third quarter of 2006.
For the three months ended December 31, 2006, operating income before general and administrative expenses totaled $701 million, a 70% improvement from $412 million reported for the third quarter of 2006. Field operating income(1) (defined as revenues less operating and maintenance expenses) improved 33% to $616 million compared to $464 million over the same comparative period. These improved fourth quarter 2006 results were due chiefly to the strong revenue growth, partially offset by an increase in operating and maintenance expenses, which totaled $570 million during the fourth quarter of 2006 compared to $561 million during the previous quarter in 2006. The increase in operating and maintenance activity was due primarily to the increased number of maintenance projects completed on our operating rigs during the quarter and higher labor costs related to ongoing recruitment efforts and the continued inflationary pressure on wages. This increase was partially offset by a decrease in shipyard expenditures following the return to activity of the Sedco 709, Deepwater Discovery, Transocean Winner and Transocean Prospect during the third and fourth quarter.
Cash flow from operations increased to $1,237 million for the 12 months ended December 31, 2006. The company reported a decrease in total debt of approximately $200 million, to $3,295 million at December 31, 2006 compared to total debt at September 30, 2006 of $3,495 million, resulting from a draw of $100 million on the $1.0 billion multi-draw term credit facility and net of repayments of $300 million in the fourth quarter of 2006.
Effective Tax Rate
The company's Annual Effective Tax Rate(2) for the 12 months ended December 31, 2006 was 18.5%, excluding the previously mentioned impact on income before income tax related to the gains from the rig sales and the TODCO tax sharing agreement as well as excluding from income tax expense various discrete tax items. The Effective Tax Rate(3) of 10.4% for the fourth quarter of 2006 reflects the impact of the previously mentioned rig sales and TODCO tax sharing income in addition to a $17 million favorable impact resulting from changes in estimates and resolution of prior years' tax disputes in various jurisdictions.
In May 2006, the company's board of directors authorized an increase in the overall amount of ordinary shares which may be repurchased under the company's share repurchase program from $2.0 billion to $4.0 billion. During the three months ended December 31, 2006, the company purchased and retired $250 million of its ordinary shares, which amounted to approximately 3.5 million ordinary shares at an average purchase price of $71.79 per share. As of January 31, 2007, the company had repurchased and retired a total of $3.0 billion of its ordinary shares under the program, which amounted to approximately 42 million ordinary shares at an average purchase price of $71.87 per share, and the company retained the authority to repurchase the remaining $1.0 billion of its ordinary shares under the program.
Conference Call Information
Transocean will conduct a teleconference call at 10:00 a.m. Eastern on February 14, 2007. To participate, dial 913-981-5522 and refer to confirmation code 2410660 approximately five to 10 minutes prior to the scheduled start time of the call.
In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto the company's website at www.deepwater.com and selecting "Investor Relations/Presentations." A file containing four charts to be discussed during the conference call, titled "4Q06 Charts," has been posted to the company's website and can also be found by selecting "Investor Relations/Presentations." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company's New York Stock Exchange trading symbol, "RIG."
A telephonic replay of the conference call should be available after 1:00 p.m. Eastern on February 14, 2007 and can be accessed by dialing 719-457-0820 and referring to the passcode 2410660. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced web addresses.
Manages 46 Offshore Rigs
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