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Transocean (RIG) Posts Narrower-Than-Expected Loss in Q2

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Transocean Limited (RIG - Free Report) reported an adjusted loss of 4 cents per share in the second quarter of 2018, narrower than the Zacks Consensus Estimate of 17 cents. The improved results came on the back of higher-than-anticipated revenues from the Ultra-Deepwater floaters. Revenues from the Ultra-Deepwater Floaters came in at $470 million, comfortably surpassing the Zacks Consensus Estimate of $396 million.

However, the bottom line deteriorated from break-even earnings per share a year ago amid increased operational and general/administrative costs due to the acquisition of Songa Offshore and lower dayrates.

Revenues of $790 million topped the Zacks Consensus Estimate of $754 million on higher fleet utilization. The top line also increased 5.2% year over year on the back of higher contract drilling revenues from the Harsh-Environment floaters.

Transocean’s High-Specification floaters contributed about 91.4% 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 $470 million and $252 million, respectively.

Revenue efficiency in the quarter was 97.4%, reflecting an increase from the prior-quarter level of 91.5%. Revenue efficiency, however, remained unchanged from the year-ago quarter.

Transocean Ltd. Price, Consensus and EPS Surprise

 

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

Costs

Transocean’s operating and maintenance expenses rose 30.2% to $431 million year over year. General and administrative expenses increased 48.6% from the year-ago figure to a total of $52 million.

In the second quarter of 2018, cash flow from operating activities came in at $3 million compared with $103 million and $319 million recorded in the first quarter of 2018 and second-quarter 2017, respectively. The sharp decline was on account of higher interest outgo.

Dayrates and Utilization

Compared with the second quarter of 2017, dayrates fell almost 17.4% in the quarter (from $329,000 to $308,300), unfavorably impacted by decline in the Midwater, Deepwater and Ultra Deepwater floaters.

However, overall fleet utilization was 57% during the quarter, up from the utilization rate of 44% and 52% recorded in the year-ago quarter and last reported quarter, respectively.

Backlog

Transocean’s strong backlog, which stands at $11.7 billion as of July 2018, reflects steady demand from customers. The backlog includes $405 million in new orders awarded during the quarter under review.

Capital Expenditure & Balance Sheet

Transocean spent $39 million on capital expenditure in the first quarter of 2018. As of Jun 30, 2018, Transocean had cash and cash equivalents of $2,506 million. Long-term debt of the company was $7,814 million, with a debt-to-capitalization ratio of 38.7%.

Zacks Rank & Key Picks

Currently, Transocean has a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are China Petroleum and Chemical Corporation (SNP - Free Report) , also known as Sinopec, ConocoPhillips (COP - Free Report) , and Marathon Oil corporation (MRO - Free Report) . While Sinopec sports a Zacks Rank #1 (Strong Buy), ConocoPhillips and Marathon Oil both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.

ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. It pulled off an average positive earnings surprise of 27.59% in the last four quarters.

Marathon Oil, a leading energy explorer, surpassed earnings estimates in three out of the trailing four quarters, with an average positive earnings surprise of 60.36%.

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