Transocean Ltd. Reports Third Quarter 2015 Results

• Revenues were $1.61 billion, compared with $1.88 billion in the second quarter of 2015;
• Operating and maintenance expenses were $880 million. This compares with $197 million in the prior period that included $788 million in net favorable items associated with Macondo-related settlement agreements, insurance recoveries and other items;
• Adjusted net income was $316 million, $0.87 per diluted share, excluding net favorable items. This compares with $408 million, $1.11 per diluted share, in the second quarter of 2015, excluding net unfavorable items;
• Net income attributable to controlling interest was $321 million, $0.88 per diluted share, including $5 million of net favorable items. This compares with second quarter net income of $342 million, $0.93 per diluted share, including $66 million of net unfavorable items;
• The Annual Effective Tax Rate(1) was 7.5 percent, down from 16.9 percent in the prior quarter;
• Cash flows from operating activities were $648 million, down sequentially from $1.31 billion due primarily to favorable Macondo-related insurance proceeds in the second quarter of 2015;
• Fleet revenue efficiency(2) was 95.0 percent, compared with 97.2 percent in the second quarter of 2015;
• Fleet utilization(3) was 70 percent, down from 75 percent in the prior quarter; and
• Contract backlog was $16.9 billion as of the October 26, 2015, Fleet Status Report.

Transocean Ltd. (NYSE: RIG) (SIX: RIGN) reported net income attributable to controlling interest of $321 million, $0.88 per diluted share, for the three months ended September 30, 2015.

Third quarter 2015 results included net favorable items of $5 million, $0.01 per diluted share, as follows:

• $8 million, $0.02 per diluted share, in discrete tax benefits;
• $7 million, $0.02 per diluted share, in net gains on early debt retirements; and
• $5 million associated with discontinued operations and asset disposal gains.

These net favorable items were partially offset by:

• $15 million, $0.03 per diluted share, related to a loss on impairment of GSF Rig 135, which the company intends to scrap; and severance costs.

After consideration of these net favorable items, third quarter 2015 adjusted net income was $316 million, or $0.87 per diluted share.

For the three months ended September 30, 2014, the company reported net loss attributable to controlling interest of $2.22 billion, $6.12 per diluted share, including net unfavorable items of $2.57 billion, $7.08 per diluted share, mainly associated with impairments of goodwill and the Deepwater Floater asset group. After consideration of these net unfavorable items, adjusted net income was $352 million, or $0.96 per diluted share.

Revenues for the three months ended September 30, 2015, decreased $276 million sequentially to $1.61 billion due primarily to lower fleet utilization and a decline in other revenues related to contract termination fees recognized in the second quarter of 2015. To a lesser extent, the decline was impacted by less favorable revenue efficiency.

Operating and maintenance expenses were $880 million during the period. This compares with $985 million in the prior quarter, which excluded $788 million in net favorable Macondo-related items. The decrease of $105 million was due primarily to reduced activity. The third quarter was also favorably impacted by the company's actions to reduce costs.

General and administrative expenses were $45 million, compared with $44 million in the prior quarter.

Depreciation expense decreased $39 million sequentially to $210 million primarily the result of the impairment of the Midwater Floater asset group in the second quarter of 2015.

Transocean's third quarter 2015 Effective Tax Rate(4) was 4.9 percent, compared with 10.3 percent in the previous quarter. The decrease was due mainly to jurisdictional and operational structure changes for certain rigs that impacted the company's deferred tax assets, partially offset by changes in estimates, and the impact of foreign currency fluctuations. Transocean's Annual Effective Tax Rate for the third quarter of 2015 was 7.5 percent, down from 16.9 percent in the prior quarter. Third quarter income tax expense also included a tax benefit of $18 million, $0.05 per diluted share, to reflect the decrease in the Annual Effective Tax Rate to 18.0 percent for the nine months ended September 30, 2015 from 21.6 percent for the six months ended June 30, 2015.

Interest expense, net of amounts capitalized, decreased $11 million sequentially to $109 million, reflecting, in part, the company's early debt retirements. Capitalized interest was $36 million, compared with $29 million in the second quarter of 2015. Interest income was $5 million, compared with $6 million in the prior quarter.

Cash flows from operating activities decreased $663 million sequentially to $648 million due primarily to the favorable Macondo-related insurance proceeds collected in the second quarter of 2015.

Capital expenditures were $940 million, compared with $195 million in the prior quarter. The increase of $745 million was largely associated with the company's newbuild program and included the final shipyard payment for the Deepwater Thalassa.

"Our continued focus on equipment reliability, uptime, and cost management resulted in another strong quarter for Transocean," said President and Chief Executive Officer, Jeremy Thigpen. "As we move forward in this challenging market, we will continue to identify opportunities to drive unnecessary cost out of our business, while simultaneously investing in opportunities that will enable us to continue to exceed the performance expectations of our customers."

deepwater.com

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