Transocean has reported net income for the three months ended September 30, 2008 of $1.106 billion, or $3.44 per diluted share, compared to net income of $973 million, or $4.63 per diluted share for the three months ended September 30, 2007. Revenues for the third quarter of 2008 were $3.192 billion compared to $1.538 billion for the third quarter of 2007.
For the nine months ended September 30, 2008, net income totaled $3.402 billion, or $10.59 per diluted share, on revenues of $9.404 billion. For the same period in 2007, net income totaled $2.075 billion, or $9.87 per diluted share, on revenues of $4.300 billion.
Net income for the nine months ended September 30, 2008 included after-tax charges of $16 million, or $0.05 per diluted share, resulting primarily from a $14 million loss on short-term investments, $10 million of discrete tax items, $3 million of merger-related costs and a $3 million loss from the early retirement of debt.
These charges were offset by income of $14 million from the TODCO tax sharing agreement. For the same period last year, net income included after-tax gains of $369 million, or $1.75 per diluted share, from the TODCO tax sharing agreement, rig sales and discrete tax items.
On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation and reclassified its ordinary shares into cash and shares (the "Reclassification"). Reported results for the third quarter and first nine months of 2008 include a full three and nine months, respectively, from GlobalSantaFe's operations. Diluted earnings per share for the third quarter and first nine months of 2007 exclude GlobalSantaFe's operations and are based on a weighted average diluted share count of 210 million and 211 million shares, respectively, which includes the effect of restating the historical diluted share count for the Reclassification.
Operations Quarterly Review
Revenues for the three months ended September 30, 2008 were $3.192 billion compared to revenues of $3.102 billion during the three months ended June 30, 2008. The $90 million quarter-to-quarter increase in total revenues included $112 million of higher contract drilling revenues reflecting a decrease in out-of-service time for planned shipyards, an increase in average dayrates and a $25 million increase in other revenues primarily from increases in integrated services and non-drilling activities.
A $47 million decline in contract drilling intangible revenues partially offset these increases. The average dayrate for the fleet increased two percent from $238,600 in the second quarter to $242,200 in the third quarter, primarily as a result of rigs commencing new contracts at higher dayrates in the third quarter.
Operating and maintenance expenses for the three months ended September 30, 2008 were $1.426 billion compared to $1.364 billion for the prior three-month period. The $62 million increase in operating and maintenance expenses primarily reflects estimated expenses of $44 million related to dropped riser and an increase in maintenance and non-drilling and integrated services costs compared to the second quarter of 2008, partially offset by reduced shipyard costs.
Interest Expense and Liquidity
Interest expense, net of amounts capitalized, for the third quarter of 2008 decreased to $100 million compared to $111 million for the second quarter of 2008. The decrease resulted primarily from a quarter-to-quarter reduction in total debt of approximately $496 million. As of September 30, 2008, total debt was $14.783 billion compared to $15.279 billion as of June 30, 2008.
Cash flow from operating activities totaled $1.270 billion for the third quarter of 2008 compared to $1.011 billion for the second quarter of 2008. Higher quarter-to-quarter cash flow during the third quarter primarily reflects increases in net income, decreases in deferred expenses and deferred taxes, partially offset by an increase in working capital.
Effective Tax Rate
The Annual Effective Tax Rate(1) for each of the third quarter and first nine months of 2008 was 15.1 percent and 13.3 percent, respectively. The Effective Tax Rate(2) for first nine months of 2008 was 13.6 percent, which reflects the impact of various discrete tax items totaling $7 million, primarily related to changes in estimates. The Effective Tax Rate(2) for the third quarter of 2008 was 13.7 percent.
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