Transocean Inc. reported net income for the three months ended March 31, 2008 of $1,189 million, or $3.71 per diluted share, compared to net income of $553 million, or $2.62 per diluted share for the three months ended March 31, 2007. Revenues for the first quarter of 2008 were $3,110 million compared to $1,328 million for the first quarter of 2007.
On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation (the "Merger") and reclassified its ordinary shares into cash and shares (the "Reclassification"). Reported results for the first quarter of 2008 include a full three months from GlobalSantaFe's operations. Diluted earnings per share for the first quarter of 2007 excludes GlobalSantaFe's operations and is based on a weighted average diluted share count of 212 million shares, which includes the effect of restating the historical diluted share count for the Reclassification. Results for the fourth quarter of 2007 include approximately one month of GlobalSantaFe's operations.
First quarter 2008 results included after-tax charges of $30 million, or $0.09 per diluted share, related to $27 million for discrete tax items, $1 million for Merger-related costs and a $2 million loss resulting from the retirement of debt. Net income for the quarter ended March 31, 2007 included after-tax gains of $22 million, or $0.10 per diluted share, resulting from the sale of a tender-assist rig and a tax benefit on discrete items.
Operations Quarterly Review
Revenues for the three months ended March 31, 2008 increased 49.7 percent to $3,110 million compared to revenues of $2,077 million during the three months ended December 31, 2007. Of the $1,033 million quarter-to-quarter increase, $919 million reflected the addition of a full quarter of GlobalSantaFe revenues, including an increase of $136 million in non-cash contract intangible revenue. The remaining increase was primarily due to a higher average dayrate for the Transocean fleet as well as a decrease in shipyards and maintenance time. The increase in average dayrate was experienced across all rig categories, primarily as a result of rigs commencing new contracts at the higher prevailing current dayrates. First quarter of 2008 results benefited from the postponement of several shipyard projects to later in the year.
Operating and maintenance expenses for the three months ended March 31, 2008 were $1,157 million compared to $923 million for the prior three-month period, an increase of $234 million or 25.4 percent. The addition of GlobalSantaFe's operations accounted for an increase of $332 million, which was partially offset by a decrease in costs for shipyards and major maintenance projects. Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year.
Depreciation, depletion and amortization increased to $367 million in the first quarter of 2008, an increase of 88.2 percent compared to $195 million in the fourth quarter of 2007. Property and equipment and certain intangible assets acquired in the Merger accounted for the majority of this increase.
General and administrative expenses decreased 18.3 percent to $49 million in the first quarter of 2008 compared to $60 million in the prior three-month period. The decrease primarily reflects a reduction in Merger-related compensation costs compared to the fourth quarter of 2007.
Interest Expense and Liquidity
Interest expense, net of amounts capitalized, for the first quarter of 2008 increased to $137 million compared to $79 million for the fourth quarter of 2007. The increase primarily resulted from interest on the borrowings incurred in conjunction with the Merger and Reclassification.
Cash flow from operating activities totaled $1,482 million for the first quarter of 2008 compared to $915 million for the fourth quarter of 2007. As of March 31, 2008, total debt was $16.6 billion, down $0.7 billion from $17.3 billion as of December 31, 2007.
Effective Tax Rate
The reported Effective Tax Rate of 15.5 percent for the first quarter of 2008 reflects the unfavorable impact of various discrete tax items of $27 million resulting from changes in estimates. Excluding these various discrete tax items, the Annual Effective Tax Rate for the first quarter of 2008 was 13.5 percent.
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