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Why Is Transocean (RIG) Down 4.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Transocean (RIG - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Transocean due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Transocean Q3 Loss Wider Than Expected, Revenues Miss
Transocean reported an adjusted net loss of 36 cents per share in the third quarter of 2023, wider than the Zacks Consensus Estimate of a loss of 22 cents. This underperformance can be attributed to a weak result from Harsh Environment floaters. The bottom line also deteriorated from the year-ago period’s recorded loss of 6 cents.
Total adjusted revenues of $721 million missed the Zacks Consensus Estimate of $738 million. The top line also declined 3.6% from the prior-year quarter’s reported figure of $748 million.
Segmental Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed 72.4% to net contract drilling revenues, while Harsh Environment floaters accounted for the remaining 27.6%. Revenues from the Ultra-deepwater and Harsh Environment floaters totaled $516 million and $197 million, respectively, compared with the year-ago quarter’s reported figures of $433 million and $258 million.
Day rates, Utilization & Backlog
Average day rates in the reported quarter increased to $391,300 from $343,400 in the year-ago quarter. The figure also beat our estimate of $367.200.
Average revenues per day from Ultra-deepwater floaters increased to $406,500 from $326,600 in the year-ago quarter. The same from Harsh Environment floaters, however, decreased to $357,400 from $374,000 in the comparable period of 2022.
The fleet utilization rate was 49.4% in the quarter, down from the prior-year period’s figure of 59.4%.
Transocean’s backlog of $9.4 billion increased sequentially from $9.2 billion.
Costs, Capex & Balance Sheet
Operations and maintenance (O&M) costs increased to $524 million from $484 million a year ago. The company spent $50 million on capital investments in the third quarter. Cash used in operating activities totaled $66 million. Cash and cash equivalents amounted to $594 million as of Sep 30, 2023. Long-term debt totaled $7.1 billion, with a debt-to-capitalization of 40.6% as of the same date.
Guidance
For the fourth quarter of 2023, Transocean expects adjusted contract drilling revenues of $760 million based on an average fleet-wide revenue efficiency of 96.5%.
It also projects O&M expenses of approximately $565 million for the same time frame. General and administrative costs are estimated to be $55 million. Cash taxes are anticipated to reach $24.3 million for the same quarter. RIG projects net interest expenses of $127 million in the fourth quarter, including $6.4 million in capitalized interest.
Capital expenses for the fourth quarter are expected to be around $270 million, including $210 million for preparing the Deepwater Aquila for a three-year contract with Petrobras in Brazil and $16 million for Deepwater Atlas and Deepwater Titan.
Transocean expects full-year O&M expenses in the range of $2.1-$2.3 billion, with G&A costs of around $195 million.
Cash taxes are expected at about $15 million for the same quarter and roughly $35 million for full-year 2023.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -1020% due to these changes.
VGM Scores
Currently, Transocean has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Transocean (RIG) Down 4.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Transocean (RIG - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Transocean due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Transocean Q3 Loss Wider Than Expected, Revenues Miss
Transocean reported an adjusted net loss of 36 cents per share in the third quarter of 2023, wider than the Zacks Consensus Estimate of a loss of 22 cents. This underperformance can be attributed to a weak result from Harsh Environment floaters. The bottom line also deteriorated from the year-ago period’s recorded loss of 6 cents.
Total adjusted revenues of $721 million missed the Zacks Consensus Estimate of $738 million. The top line also declined 3.6% from the prior-year quarter’s reported figure of $748 million.
Segmental Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed 72.4% to net contract drilling revenues, while Harsh Environment floaters accounted for the remaining 27.6%. Revenues from the Ultra-deepwater and Harsh Environment floaters totaled $516 million and $197 million, respectively, compared with the year-ago quarter’s reported figures of $433 million and $258 million.
Day rates, Utilization & Backlog
Average day rates in the reported quarter increased to $391,300 from $343,400 in the year-ago quarter. The figure also beat our estimate of $367.200.
Average revenues per day from Ultra-deepwater floaters increased to $406,500 from $326,600 in the year-ago quarter. The same from Harsh Environment floaters, however, decreased to $357,400 from $374,000 in the comparable period of 2022.
The fleet utilization rate was 49.4% in the quarter, down from the prior-year period’s figure of 59.4%.
Transocean’s backlog of $9.4 billion increased sequentially from $9.2 billion.
Costs, Capex & Balance Sheet
Operations and maintenance (O&M) costs increased to $524 million from $484 million a year ago. The company spent $50 million on capital investments in the third quarter. Cash used in operating activities totaled $66 million. Cash and cash equivalents amounted to $594 million as of Sep 30, 2023. Long-term debt totaled $7.1 billion, with a debt-to-capitalization of 40.6% as of the same date.
Guidance
For the fourth quarter of 2023, Transocean expects adjusted contract drilling revenues of $760 million based on an average fleet-wide revenue efficiency of 96.5%.
It also projects O&M expenses of approximately $565 million for the same time frame. General and administrative costs are estimated to be $55 million. Cash taxes are anticipated to reach $24.3 million for the same quarter. RIG projects net interest expenses of $127 million in the fourth quarter, including $6.4 million in capitalized interest.
Capital expenses for the fourth quarter are expected to be around $270 million, including $210 million for preparing the Deepwater Aquila for a three-year contract with Petrobras in Brazil and $16 million for Deepwater Atlas and Deepwater Titan.
Transocean expects full-year O&M expenses in the range of $2.1-$2.3 billion, with G&A costs of around $195 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -1020% due to these changes.
VGM Scores
Currently, Transocean has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Transocean has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.