For the six months ended June 30, 2007, net income totaled $1,102 million, or $3.67 per diluted share, on revenues of $2,762 million. For the same period last year, net income totaled $455 million, or $1.36 per diluted share, on revenues of $1,671 million. Net income for the first half of 2007 included an after-tax gain of $20 million, or $0.07 per diluted share, resulting primarily from the sale of the tender rig Charley Graves during the first quarter 2007. For the same period last year, net income included after-tax gains of $153 million, or $0.46 per diluted share, resulting from the sale of the Transocean Explorer, Searex XII, Peregrine III and a platform rig.
Operations Quarterly Review
Revenues for the three months ended June 30, 2007 increased eight percent to $1,434 million compared to revenues of $1,328 million during the three months ended March 31, 2007. The quarter-to-quarter increase in revenues was primarily due to a combination of a higher average dayrate, increased rig activity and decreased shipyard time. The second quarter 2007 average dayrate reached a record high $202,400, up two percent compared to $198,000 during the first quarter 2007. For the first time in Transocean's history, the fleet-wide quarterly average dayrate exceeded $200,000. Over the same period, rig utilization rose to 91 percent from 88 percent. Improved utilization was consistent across the company's fleet as six rigs came out of shipyard and commenced new contracts. In addition, the Jack Bates and Deepwater Expedition had increased activity levels compared to the first quarter of 2007 as the Jack Bates was in a shipyard through mid-May and the Deepwater Expedition mobilized from Brazil to Egypt to begin a new contract in January.
For the three months ended June 30, 2007, operating income before general and administrative expenses totaled $705 million, a three percent increase from $683 million reported for the first quarter. The $22 million increase in operating income before general and administrative expense was due to higher revenues, driven by increased dayrates and rig utilization. Partially offsetting the higher revenues relative to the first quarter 2007 were $59 million in increased operating and maintenance expenses, $20 million less in after-tax gains from the disposal of assets and a decrease in operating days related to the shipyard projects for the Sedco 700 and Trident 15. The increase in operating and maintenance expenses for the second quarter 2007 was primarily due to increased operating days on six rigs, an increased number of maintenance projects and scheduled pay increases. In addition to the Jack Bates and Deepwater Expedition, four other rigs had increased operating days in the second quarter, as the J.T. Angel, Randolph Yost and Trident 2 returned to service after shipyard projects in the first quarter, and the C. Kirk Rhein, Jr. mobilized to India in January 2007 to begin a new contract. Partially offsetting the increased operating days were second-quarter shipyard projects for the Sedco 700 and Trident 15.
Field operating income(1) (defined as revenues less operating and maintenance expenses) increased six percent to $807 million compared to $760 million over the prior three-month period. The increase in second quarter 2007 field operating income was due chiefly to strong revenue growth combined with stable operating margins.
Cash flow from operations totaled $607 million for the second quarter 2007 compared to $176 million for the second quarter of 2006. For the six months ended June 30, 2007, cash flow from operations increased to $1,261 million compared to $444 million for the same period last year. As of June 30, 2007, total debt was $3,064 million, down $420 million compared to $3,484 million as of March 31, 2007. Of the $420 million of debt reduction during the second quarter 2007, $230 million was repayment of term credit facilities and $190 million was reductions in the company's revolving credit facility.
Effective Tax Rate
The company's Annual Effective Tax Rate(2) for the three months ended June 30, 2007 was 16.1 percent, excluding various discrete items. The Effective Tax Rate(3) of 14.4 percent for the second quarter of 2007 reflects an $11 million favorable impact resulting from changes in estimates. The company currently expects the Annual Effective Tax Rate for the remainder of 2007 to be approximately 15.0 percent.
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