Transocean Ltd. (RIG - Free Report) posted adjusted loss of 30 cents a share in the first quarter of 2019, a penny wider than the Zacks Consensus Estimate. 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 $258 million, lagging the consensus estimate of $289 million.
However, the bottom line improved from the year-ago period’s loss of 48 cents on robust contribution from Ultra-Deepwater floaters. The group contributed $476 million to Transocean’s revenues, ahead of the Zacks Consensus Estimate of $463 million. Higher dayrates and utilization helped too.
The offshore drilling powerhouse generated total revenues of $754 million, in line with the Zacks Consensus Estimate but increased 13.6% from the prior-year figure of $664 million.
Segmental Revenue Break-Up
Transocean’s High-Specification floaters contributed about 97% to total contract drilling revenues, while Deepwater and Midwater floaters accounted for the remainder. In the quarter under review, revenues from Ultra-Deepwater and Harsh Environment floaters totaled $476 million (above the Zacks Consensus Estimate of $463 million) and $258 million (lower than our estimate of $289 million), respectively.
Revenue efficiency in the quarter was 98%, reflecting an increase from both the fourth quarter and year-ago levels of 96% and 92%, respectively.
Dayrates and Utilization
On an encouraging note, average dayrate in the quarter under review rose to $306,500 from the year-ago level of $287,600, owing to the uptick in activity in the Asia Pacific and strength in harsh environment markets of Norway and Canada. Overall fleet utilization was 56% during the quarter, up from the utilization rate of 52% in the year-ago period.
Backlog
Transocean’s strong backlog, which was recorded at $12.1 billion as of Apr 17, reflects steady demand from customers. While it declined $400 million from the year-ago period, it’s still the highest in the industry. During the first quarter, the company added more than $370 million to its backlog, chiefly attributable two new award from Brazilian energy major Petrobras (PBR - Free Report) .
Costs
Transocean’s operating and maintenance expenses rose 29.8% year over year to $508 million. Depreciation costs also increased to $217 million from $202 million in the year-ago quarter. With costs rising, the company reported negative cash flow from operating activities to the tune of $51 million.
Capital Expenditure & Balance Sheet
Transocean spent $52 million on capital expenditure in the first quarter of 2019. It had cash and cash equivalents of $1.9 billion as of Mar 31, 2019. Long-term debt of the company was $9.1 billion, with a debt-to-capitalization ratio of 41.2% as of the same date.
Guidance
For the second quarter, the company guided toward operating and maintenance expenses of $545 million. Capital spending is likely to be around $123 million (including $70 million on under-construction newbuilds). Finally, Transocean sees revenue efficiency at 95% in the second quarter.
Zacks Rank & Key Picks
Transocean holds a Zacks Rank #3 (Hold).
Meanwhile, investors interested in the the energy space could look at some better options like ProPetro Holding Corp. (PUMP - Free Report) and TransCanada Corporation (TRP - Free Report) that sport a Zacks Rank #2 (Buy).
The 2019 Zacks Consensus Estimate for Midland, TX-based ProPetro is $2.53, representing some 26.5% earnings per share growth over 2018. Next year’s average forecast is $2.80 pointing to another 10.5% growth.
TransCanada has a 100% track of outperforming estimates over the last four quarters at an average rate of 14.8%.
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Transocean Ltd. (RIG - Free Report) posted adjusted loss of 30 cents a share in the first quarter of 2019, a penny wider than the Zacks Consensus Estimate. 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 $258 million, lagging the consensus estimate of $289 million.
However, the bottom line improved from the year-ago period’s loss of 48 cents on robust contribution from Ultra-Deepwater floaters. The group contributed $476 million to Transocean’s revenues, ahead of the Zacks Consensus Estimate of $463 million. Higher dayrates and utilization helped too.
The offshore drilling powerhouse generated total revenues of $754 million, in line with the Zacks Consensus Estimate but increased 13.6% from the prior-year figure of $664 million.
Segmental Revenue Break-Up
Transocean’s High-Specification floaters contributed about 97% to total contract drilling revenues, while Deepwater and Midwater floaters accounted for the remainder. In the quarter under review, revenues from Ultra-Deepwater and Harsh Environment floaters totaled $476 million (above the Zacks Consensus Estimate of $463 million) and $258 million (lower than our estimate of $289 million), respectively.
Revenue efficiency in the quarter was 98%, reflecting an increase from both the fourth quarter and year-ago levels of 96% and 92%, respectively.
Dayrates and Utilization
On an encouraging note, average dayrate in the quarter under review rose to $306,500 from the year-ago level of $287,600, owing to the uptick in activity in the Asia Pacific and strength in harsh environment markets of Norway and Canada. Overall fleet utilization was 56% during the quarter, up from the utilization rate of 52% in the year-ago period.
Backlog
Transocean’s strong backlog, which was recorded at $12.1 billion as of Apr 17, reflects steady demand from customers. While it declined $400 million from the year-ago period, it’s still the highest in the industry. During the first quarter, the company added more than $370 million to its backlog, chiefly attributable two new award from Brazilian energy major Petrobras (PBR - Free Report) .
Costs
Transocean’s operating and maintenance expenses rose 29.8% year over year to $508 million. Depreciation costs also increased to $217 million from $202 million in the year-ago quarter. With costs rising, the company reported negative cash flow from operating activities to the tune of $51 million.
Capital Expenditure & Balance Sheet
Transocean spent $52 million on capital expenditure in the first quarter of 2019. It had cash and cash equivalents of $1.9 billion as of Mar 31, 2019. Long-term debt of the company was $9.1 billion, with a debt-to-capitalization ratio of 41.2% as of the same date.
Guidance
For the second quarter, the company guided toward operating and maintenance expenses of $545 million. Capital spending is likely to be around $123 million (including $70 million on under-construction newbuilds). Finally, Transocean sees revenue efficiency at 95% in the second quarter.
Zacks Rank & Key Picks
Transocean holds a Zacks Rank #3 (Hold).
Meanwhile, investors interested in the the energy space could look at some better options like ProPetro Holding Corp. (PUMP - Free Report) and TransCanada Corporation (TRP - Free Report) that sport a Zacks Rank #2 (Buy).
The 2019 Zacks Consensus Estimate for Midland, TX-based ProPetro is $2.53, representing some 26.5% earnings per share growth over 2018. Next year’s average forecast is $2.80 pointing to another 10.5% growth.
TransCanada has a 100% track of outperforming estimates over the last four quarters at an average rate of 14.8%.
Will you retire a millionaire?
One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”
Click to get it free >>
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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