After coming up with profitable results in the third quarter, Transocean Limited (RIG - Free Report) disappointed investors by reporting a net loss in the fourth quarter of 2018. The company posted adjusted loss of 34 cents a share, wider than the Zacks Consensus Estimate and the year-ago figure, both of which stood at 24 cents. Lower-than-anticipated revenues from harsh environment floaters along with increasing costs led to the underperformance. Precisely, revenues from harsh environment floaters came in at $253 million, lagging the consensus estimate of $298 million. Weather-related downtime on a couple of its harsh environment floaters located offshore Canada led to lost revenues of $21 million. Further, operational inefficiencies and reduced y/y dayrates led to weaker results than the year-ago quarter.
Nonetheless, the offshore drilling powerhouse generated total revenues of $748 million, surpassing the Zacks Consensus Estimate of $729 million. The top line also increased from the prior-year figure of $629 million.
Segmental Revenue Break-Up
Transocean’s High-Specification floaters contributed about 95% to total contract drilling revenues, while Deepwater floaters, Midwater floaters, High-Specification Jackups accounted for the remainder. In the quarter under review, revenues from Ultra-Deepwater and Harsh Environment floaters totaled $457 million and $253 million, respectively.
Revenue efficiency in the quarter was 96%, reflecting an increase from both the third quarter and year-ago level of 95% and 92%, respectively.
Dayrates and Utilization
On a discouraging note, dayrates in the quarter under review fell to $293,100 from the year-ago level of $296,700, owing to a decline in average daily revenues for Ultra Deepwater and Deepwater floaters.
Overall fleet utilization was 62% during the quarter, up from the utilization rate of 53% and 65% recorded in the year-ago period and last reported quarter, respectively.
Backlog
Transocean’s strong backlog, which was recorded at $12.2 billion as of Feb 11, reflects steady demand from customers. While the company won a few small contracts since the last fleet report in October 2018, the $830-million worth five-year drilling contract received from Chevron Corporation (CVX - Free Report) served as a fundamental component to boost its backlog that came in at $11.5 billion as of Oct 22. Markedly, Transocean, sitting atop a record backlog, is the largest provider of offshore contract drilling services.
Costs
Transocean’s operating and maintenance expenses rose 28.7% year over year to $497 million. Depreciation costs also increased to $204 million from $184 million in the year-ago quarter.
Cash flow from operating activities came in at $238 million in the fourth quarter of 2018.
Capital Expenditure & Balance Sheet
Transocean spent $44 million on capital expenditure in the fourth quarter of 2018. It had cash and cash equivalents of $2,160 million as of Dec 31, 2018. Long-term debt of the company was $9,605 million, with a debt-to-capitalization ratio of 42.3% as of the same date.
Zacks Rank & Key Picks
Currently, Transocean has a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space include Repsol SA (REPYY - Free Report) and YPF Sociedad Anonima (YPF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Repsol’s 2019 earnings are expected to increase 13.69% on a year-over-year basis.
YPF Sociedad delivered average positive earnings surprise of 210.38% in the trailing four quarters.
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After coming up with profitable results in the third quarter, Transocean Limited (RIG - Free Report) disappointed investors by reporting a net loss in the fourth quarter of 2018. The company posted adjusted loss of 34 cents a share, wider than the Zacks Consensus Estimate and the year-ago figure, both of which stood at 24 cents. Lower-than-anticipated revenues from harsh environment floaters along with increasing costs led to the underperformance. Precisely, revenues from harsh environment floaters came in at $253 million, lagging the consensus estimate of $298 million. Weather-related downtime on a couple of its harsh environment floaters located offshore Canada led to lost revenues of $21 million. Further, operational inefficiencies and reduced y/y dayrates led to weaker results than the year-ago quarter.
Nonetheless, the offshore drilling powerhouse generated total revenues of $748 million, surpassing the Zacks Consensus Estimate of $729 million. The top line also increased from the prior-year figure of $629 million.
Segmental Revenue Break-Up
Transocean’s High-Specification floaters contributed about 95% to total contract drilling revenues, while Deepwater floaters, Midwater floaters, High-Specification Jackups accounted for the remainder. In the quarter under review, revenues from Ultra-Deepwater and Harsh Environment floaters totaled $457 million and $253 million, respectively.
Revenue efficiency in the quarter was 96%, reflecting an increase from both the third quarter and year-ago level of 95% and 92%, respectively.
Dayrates and Utilization
On a discouraging note, dayrates in the quarter under review fell to $293,100 from the year-ago level of $296,700, owing to a decline in average daily revenues for Ultra Deepwater and Deepwater floaters.
Overall fleet utilization was 62% during the quarter, up from the utilization rate of 53% and 65% recorded in the year-ago period and last reported quarter, respectively.
Backlog
Transocean’s strong backlog, which was recorded at $12.2 billion as of Feb 11, reflects steady demand from customers. While the company won a few small contracts since the last fleet report in October 2018, the $830-million worth five-year drilling contract received from Chevron Corporation (CVX - Free Report) served as a fundamental component to boost its backlog that came in at $11.5 billion as of Oct 22. Markedly, Transocean, sitting atop a record backlog, is the largest provider of offshore contract drilling services.
Costs
Transocean’s operating and maintenance expenses rose 28.7% year over year to $497 million. Depreciation costs also increased to $204 million from $184 million in the year-ago quarter.
Cash flow from operating activities came in at $238 million in the fourth quarter of 2018.
Capital Expenditure & Balance Sheet
Transocean spent $44 million on capital expenditure in the fourth quarter of 2018. It had cash and cash equivalents of $2,160 million as of Dec 31, 2018. Long-term debt of the company was $9,605 million, with a debt-to-capitalization ratio of 42.3% as of the same date.
Zacks Rank & Key Picks
Currently, Transocean has a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space include Repsol SA (REPYY - Free Report) and YPF Sociedad Anonima (YPF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Repsol’s 2019 earnings are expected to increase 13.69% on a year-over-year basis.
YPF Sociedad delivered average positive earnings surprise of 210.38% in the trailing four quarters.
Is Your Investment Advisor Fumbling Your Financial Future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”
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Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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