Robert L. Long, Chief Executive Officer of Transocean Inc., stated, "Demand for deepwater drilling rigs continues to be strong and we continue to benefit from the significant backlog we have built and the ongoing rollover of contracts to higher and higher dayrates. The exceptional results realized in the first quarter can be attributed in large part to great execution by our people in achieving significantly improved revenue efficiency fleet wide while continuing to improve our safety performance as we strive for incident-free operations."
Operations Quarterly Review
Revenues for the three months ended March 31, 2007 increased 12% to $1,328 million compared to revenues of $1,186 million during the three months ended December 31, 2006. This increase in revenues was primarily due to an improvement in average daily revenue, which rose 15% to $198,000 from $171,700 during the three months ended December 31, 2006, and increases in rig revenue efficiency. 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, first quarter 2007 revenues were enhanced by increased activity as the semisubmersible rig C.K. Rhein, Jr. commenced operations following the completion of its reactivation project.
For the three months ended March 31, 2007, operating income before general and administrative expenses totaled $683 million, a 3% decline from $701 million reported for the fourth quarter of 2006. This decline was due to gains of only $23 million on rig sales recognized in the first quarter of 2007 compared to gains on rig sales of $183 million recognized in the fourth quarter of 2006. Field operating income(1) (defined as revenues less operating and maintenance expenses) improved 23% to $760 million compared to $616 million over the prior three-month period. The improvement in first quarter 2007 field operating income was due chiefly to the strong revenue growth and also benefited from stable operating and maintenance expenses, which totaled $568 million during the first quarter of 2007 compared to $570 million during the previous quarter in 2006.
Effective Tax Rate
The company's Annual Effective Tax Rate(2) for the three months ended March 31, 2007 was 13.7%, excluding the previously mentioned impact on income before income tax related to the gain from the rig sale as well as excluding from income tax expense on various discrete items. The Effective Tax Rate(3) of 13.3% for the first quarter of 2007 reflects the impact of the previously mentioned rig sale and a $2 million favorable impact resulting from changes in estimates and the resolution of prior years' tax disputes in various jurisdictions. The company currently expects the effective tax rate for the remainder of 2007 to be approximately 14%, excluding the previously mentioned effects on income before tax related to the gain from the rig sale and excluding various discrete tax items.
During the three months ended March 31, 2007, the company repurchased and retired $400 million of its ordinary shares, which amounted to approximately 5.2 million ordinary shares at an average purchase price of $77.39 per share. As of April 30, 2007, the company had repurchased and retired a total of $3.4 billion of its ordinary shares under the program, which amounted to approximately 47 million ordinary shares at an average purchase price of $72.48 per share. The company has authority remaining to repurchase $600 million of its ordinary shares under the program.
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