Transocean Inc. Reports 4th Quarter and FY 2003 Results



Transocean Inc. reported net income for the three months ended December 31, 2003 of $5.5 million, or $0.02 per diluted share, on revenues of $591.5 million. Results for the quarter included an after-tax charge totaling $17.4 million, or $0.05 per diluted share, pertaining to the restructuring of certain benefit plans in Nigeria. Excluding the impact of the Nigeria benefit plan charge, net income for the three months ended December 31, 2003 was $22.9 million, or $0.07 per diluted share.

During the corresponding three months in 2002, the company reported a net loss of $2,780.7 million, or $8.71 per diluted share, on revenues of $664.6 million. The results included a non-cash charge of $2,876.0 million, or $9.01 per diluted share, relating to the company's annual test for impairment of goodwill, and an after-tax charge of $6.2 million, or $0.02 per diluted share, pertaining to an impairment loss on long-lived assets. Excluding the impact of the goodwill impairment charge and impairment loss on long-lived assets, net income for the three months ended December 31, 2002 was $101.5 million, or $0.32 per diluted share.

For the twelve months ended December 31, 2003, net income was $19.2 million, or $0.06 per diluted share, on revenues of $2,434.3 million. Full year 2003 results included the previously discussed charge relating to the restructuring of benefit plans in Nigeria, as well as costs totaling $8.8 million, or $0.03 per diluted share, relating to the planned initial public offering (IPO) of the company's Gulf of Mexico Shallow and Inland Water business segment, operated through its wholly-owned subsidiary, TODCO, after-tax charges of $26.4 million, or $0.08 per diluted share, resulting from the impairment of certain assets, and an after-tax loss of $13.8 million, or $0.04 per diluted share, relating to the early retirement of debt, partially offset by a favorable resolution of a non-U.S. income tax liability of $14.6 million, or $0.04 per diluted share. Excluding the impact of the charge relating to the restructuring of benefit plans in Nigeria, IPO costs, asset impairment charges, debt retirement loss and favorable income tax resolution, net income for the twelve months ended December 31, 2003 was $71.0 million, or $0.22 per diluted share.

During the corresponding twelve months in 2002, the company reported a net loss of $3,731.9 million, or $11.69 per diluted share, on revenues of $2,673.9 million. Full year 2002 results included a non-cash charge of $4,239.7 million, or $13.29 per diluted share, relating to the impairment of goodwill following the company's adoption of Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other Intangible Assets, and the October 2002 annual test for impairment of goodwill as prescribed by SFAS 142. In addition, full year 2002 results included an after-tax loss of $33.5 million, or $0.10 per diluted share, resulting from the non-cash impairment of certain long-lived assets. These charges were partially offset by a tax benefit totaling $175.7 million, or $0.55 per diluted share, attributable to the restructuring of certain non-U.S. operations. Excluding the impact of charges relating to goodwill impairment, the impairment of long-lived assets and the tax benefit, net income for the twelve months ended December 31, 2002 was $365.6 million, or $1.15 per diluted share.

Cash flow from operations totaled $61.2 million and $525.8 million for the three and twelve months ended December 31, 2003, respectively. During 2003, the company reduced total debt by $1,019.9 million. In addition, the company's capital expenditures for 2003 included $382.8 million to terminate two deepwater drillship synthetic operating leases.

Revenues for the company's International and U.S. Floater Contract Drilling Services business segment totaled $531.1 million for the three months ended December 31, 2003, down 6% from segment revenues of $564.4 million in the preceding three months of 2003. During the corresponding three months in 2002, segment revenues were $612.6 million. Segment operating income, before general and administrative expense, was $75.4 million during the three months ended December 31, 2003, while field operating income (defined as revenues less operating and maintenance expenses) totaled $177.0 million. The segment results compared to operating income, before general and administrative expense, of $118.9 million and field operating income of $222.0 million for the preceding quarter of 2003. During the corresponding three months in 2002, the segment reported an operating loss, before general and administrative expense, of $2,309.8 million, which included a non-cash charge of $2,494.1 million resulting from the company's annual test for impairment of goodwill. Field operating income during the same three months in 2002 was $295.8 million. Segment fleet utilization for the three months ended December 31, 2003 declined to 68% from 71% during the preceding three months in 2003, due principally to lower business activity among floating rigs in the U.S. Gulf of Mexico and North Sea. Segment fleet utilization during the fourth quarter of 2002 was 74%.

The company expects continued difficulty in its International and U.S. Floater Contract Drilling Services business segment in the near-term, with encouraging signs of improvement for this segment during the second half of the year and into 2005. The company's Other Floater rigs, consisting largely of second- and third-generation semisubmersibles with conventional capabilities, will remain in a business environment characterized by excess capacity on a global scale. Seasonal improvement through the spring and summer drilling period in the U.K.-sector of the North Sea should offer a modest recovery. In Norway, improvement in semisubmersible demand has recently produced a contract extension on one of the company's rigs as well as other near-term contract possibilities. With respect to the international jackup market sector, excess capacity continues in West Africa, although global demand for these jackup rigs remains strong and is expected to improve throughout 2004. Although the company expects intermittent idle time on some of its deepwater rigs through the first half of 2004, it has seen an increase in bid opportunities for long-term contracts starting in the second half of 2004 and into 2005 for these units.

The Gulf of Mexico Shallow and Inland Water business segment (TODCO) experienced a 3% improvement in revenues for the three months ended December 31, 2003, to $60.4 million, compared to segment revenues of $58.5 million during the preceding three months in 2003. During the corresponding three months in 2002, segment revenues were $52.0 million. The business segment's operating loss, before general and administrative expense, declined during the three months ended December 31, 2003, to $14.6 million, from an operating loss, before general and administrative expense, of $24.9 million during the preceding three months in 2003. An operating loss, before general and administrative expense, of $403.5 million during the corresponding three months in 2002 included a non-cash charge of $381.9 million pertaining to the company's annual test for impairment of goodwill. Field operating income increased to $7.7 million for the three months ended December 31, 2003, from a field operating loss of $2.1 million during the preceding three months in 2003. Field operating income totaled $ 2.3 million during the corresponding three months in 2002. Higher average dayrates of $25,800 among the segment's jackup and submersible rigs were a primary contributor to the improved revenue and operating measures for the three months ended December 31, 2003. The average dayrate compared to $20,800 for the preceding three months in 2003 and $21,700 for the corresponding three months in 2002.
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