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Transocean (RIG) Breaks Even in Q2 Earnings, Revenues Beat

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Offshore drilling giant Transocean Ltd. (RIG - Free Report) reported stronger-than-expected second-quarter 2017 results, buoyed by solid revenue efficiency and cost control initiatives. In particular, the company achieved another quarter of outstanding revenue efficiency at 97.4%, up from 96.2% a year ago.

Transocean’s earnings – after adjusting for impairment associated with the sale of jackup rigs to Borr Drilling – broke even in the quarter. The Zacks Consensus Estimate had pointed to a loss of 11 cents. However, the bottom line decreased from the year-ago adjusted earnings of 17 cents per share amid reduced activity and lower dayrates.

Total quarterly revenues of $751 million were down 20% year over year on lower contract drilling sales year but surpassed the Zacks Consensus Estimate of $716 million.

Transocean’s high-specification floaters contributed about 85% to total revenue, while midwater floaters, high-specification jackups, other rig activities, integrated services and others accounted for the remainder.

Transocean Ltd. Price, Consensus and EPS Surprise


Transocean Ltd. Price, Consensus and EPS Surprise | Transocean Ltd. Quote


Transocean – which boasts long-term rig contracts with energy biggies such as Chevron Corp. (CVX - Free Report) , Royal Dutch Shell plc (RDS.A - Free Report) and Statoil ASA – was able to reduce its operating and maintenance expenses by an impressive 33% to $333 million. The cost discipline, coupled with lower capital expenditure, enabled the Zacks Rank #3 (Hold) company to generate $319 million in cash flow from operating activities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Dayrates and Utilization

Compared with the second quarter of 2016, dayrates fell 6% (from $352,500 to $329,900), unfavorably impacted by declines in all types of rigs barring high-specification jackups.

Overall fleet utilization was 44% during the quarter, down from the year-ago utilization rate of 47%.

Capital Expenditure & Balance Sheet

While Transocean spend $458 million as capital expenditure in the second quarter of 2016, the amount came down sharply to just $136 million during the three months under review. The lion’s share of this $136 million went toward the newbuild program.  

As of Jun 30, 2017, Transocean had cash and cash equivalents of $2,417 million.

Share Performance

Shares of Transocean have lost 33.9% during the second quarter versus the 28.7% decline of the industry.

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