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Offshore drilling giant Transocean Ltd. (RIG - Free Report) reported stronger-than-expected fourth-quarter 2016 results, buoyed by solid revenue efficiency and cost control initiatives. In particular, the company achieved another quarter of outstanding revenue efficiency at 100.3%, up from 95.9% a year ago.
Earnings per share (excluding special items) came in at 63 cents, significantly ahead of the Zacks Consensus Estimate of 4 cents.
However, the bottom line decreased from the year-ago adjusted earnings of $1.68 per share amid reduced activity and lower dayrates.
Total quarterly revenues of $974 million were down 47% year over year but surpassed the Zacks Consensus Estimate of $786 million.
Transocean’s high-spec floaters contributed about 71% to total revenue, while mid-water floaters and high specification jackups accounted for 3% and 7% of the total, respectively. The remaining revenue came from other rig activities, integrated services and others.
Transocean – which saw a number of rig contract cancellations last year from clients including Murphy Oil Corp. (MUR - Free Report) and ExxonMobil Corp. (XOM - Free Report) – earned operating profit of $339 million during the quarter, compared to $750 million in the year-ago period. The decline primarily reflects sharply lower contract drilling revenues.
However, Transocean was able to reduce its operating and maintenance expenses by an impressive 60% to $314 million. The cost discipline, coupled with lower capital expenditure, enabled the company to generate $633 million in cash flow from operating activities.
Dayrates and Utilization
Compared to the fourth quarter of 2015, dayrates fell 22% (from $422,800 to $329,400), unfavorably impacted by declines in all types of rigs.
Overall fleet utilization was 46% during the quarter, down from the year-ago utilization rate of 60%.
Capital Expenditure & Balance Sheet
While Transocean spend $665 million as capital expenditure in the fourth quarter of 2015, the amount came down sharply to just $272 million during the three months under review. Lion’s share of this $272 million went toward the newbuild program.
As of Dec 31, 2016, Transocean had cash and cash equivalents of $3,052 million.
Zacks Rank & Stock Picks
Transocean currently retains a Zacks Rank #3 (Hold).
Houston, TX-based Independence Contract Drilling offers land drilling services for oil and natural gas producers primarily in the U.S. The company’s expected EPS growth rate for 3 to 5 years currently stands at 7% –– comparing favorably with the industry growth rate of 1.10%.
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Transocean (RIG) Q4 Earnings Beat Despite Market Challenges
Offshore drilling giant Transocean Ltd. (RIG - Free Report) reported stronger-than-expected fourth-quarter 2016 results, buoyed by solid revenue efficiency and cost control initiatives. In particular, the company achieved another quarter of outstanding revenue efficiency at 100.3%, up from 95.9% a year ago.
Earnings per share (excluding special items) came in at 63 cents, significantly ahead of the Zacks Consensus Estimate of 4 cents.
However, the bottom line decreased from the year-ago adjusted earnings of $1.68 per share amid reduced activity and lower dayrates.
Total quarterly revenues of $974 million were down 47% year over year but surpassed the Zacks Consensus Estimate of $786 million.
Transocean’s high-spec floaters contributed about 71% to total revenue, while mid-water floaters and high specification jackups accounted for 3% and 7% of the total, respectively. The remaining revenue came from other rig activities, integrated services and others.
Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. Price, Consensus and EPS Surprise | Transocean Ltd. Quote
Operating Statistics
Transocean – which saw a number of rig contract cancellations last year from clients including Murphy Oil Corp. (MUR - Free Report) and ExxonMobil Corp. (XOM - Free Report) – earned operating profit of $339 million during the quarter, compared to $750 million in the year-ago period. The decline primarily reflects sharply lower contract drilling revenues.
However, Transocean was able to reduce its operating and maintenance expenses by an impressive 60% to $314 million. The cost discipline, coupled with lower capital expenditure, enabled the company to generate $633 million in cash flow from operating activities.
Dayrates and Utilization
Compared to the fourth quarter of 2015, dayrates fell 22% (from $422,800 to $329,400), unfavorably impacted by declines in all types of rigs.
Overall fleet utilization was 46% during the quarter, down from the year-ago utilization rate of 60%.
Capital Expenditure & Balance Sheet
While Transocean spend $665 million as capital expenditure in the fourth quarter of 2015, the amount came down sharply to just $272 million during the three months under review. Lion’s share of this $272 million went toward the newbuild program.
As of Dec 31, 2016, Transocean had cash and cash equivalents of $3,052 million.
Zacks Rank & Stock Picks
Transocean currently retains a Zacks Rank #3 (Hold).
A better-ranked player from the Oil & Gas - Drilling industry would be Independence Contract Drilling Inc. (ICD - Free Report) - a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Houston, TX-based Independence Contract Drilling offers land drilling services for oil and natural gas producers primarily in the U.S. The company’s expected EPS growth rate for 3 to 5 years currently stands at 7% –– comparing favorably with the industry growth rate of 1.10%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>