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Transocean (RIG) Q2 Loss Wider Than Expected, Sales Lag
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Transocean Ltd. (RIG - Free Report) posted second-quarter 2019 adjusted loss of 34 cents a share, a penny wider than the Zacks Consensus Estimate. Lower-than-anticipated revenues from Harsh Environment floaters and increase in costs primarily led to the underperformance. Precisely, revenues from harsh environment floaters came in at $251 million, lagging the consensus estimate of $296 million. The bottom line also compared unfavorably with the year-ago period’s loss of 4 cents.
The offshore drilling powerhouse generated total revenues of $758 million, missing the Zacks Consensus Estimate of $774 million. The top line also declined from the prior-year figure of $790 million.
Transocean’s High-Specification floaters contributed about 97.2% 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 $486 million and $251 million, respectively.
Revenue efficiency was 98%, in line with the first quarter. The figure reflected an increase from the year-ago level of 97%.
Dayrates and Utilization
On an encouraging note, average dayrate in the quarter under review rose to $314,900 from the year-ago level of $308,300, owing to an uptick in activity in the Asia Pacific, Brazil and GoM. The company witnessed y/y higher average revenue per day from harsh environment and midwater floaters. Overall fleet utilization was 56% during the quarter, down from the utilization rate of 57% in the year-ago period.
Backlog
Transocean’s backlog, which was recorded at $11.4 billion as of Jul 25, reflects a decline of $300 million from the year-ago period. During the second quarter, the company added approximately $158 million to its backlog.
Costs, Capex & Balance Sheet
Transocean’s operating and maintenance expenses rose 11.5% year over year to $774 million. Operating and maintenance costs also increased to $510 million from $431 million in the year-ago quarter. Transocean spent $86 million on capital expenditure in the second quarter of 2019. Cash provided by operating activities totaled $153 million, resulting in a positive free cash flow of $67 million. It had cash and cash equivalents of $2.2 billion on Jun 30, 2019. Long-term debt was $9.4 billion, with a debt-to-capitalization ratio of 42.3% as of the same date.
Guidance
For the third quarter, the company expects operating and maintenance expenses of $575 million. Full-year operating and maintenance costs are expected to be around $2.1 billion. Capital spending is likely to be around $215 million (including $120 million to be spent on under-construction newbuilds) in the third quarter.
Zacks Rank & Key Picks
Currently, Transocean has a Zacks Rank #3 (Hold). Some better-ranked players from the same industry are TC PipeLines, LP , MPLX LP (MPLX - Free Report) and Oasis Midstream Partners LP , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Transocean (RIG) Q2 Loss Wider Than Expected, Sales Lag
Transocean Ltd. (RIG - Free Report) posted second-quarter 2019 adjusted loss of 34 cents a share, a penny wider than the Zacks Consensus Estimate. Lower-than-anticipated revenues from Harsh Environment floaters and increase in costs primarily led to the underperformance. Precisely, revenues from harsh environment floaters came in at $251 million, lagging the consensus estimate of $296 million. The bottom line also compared unfavorably with the year-ago period’s loss of 4 cents.
The offshore drilling powerhouse generated total revenues of $758 million, missing the Zacks Consensus Estimate of $774 million. The top line also declined from the prior-year figure of $790 million.
Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. price-consensus-eps-surprise-chart | Transocean Ltd. Quote
Segmental Revenue Break Up
Transocean’s High-Specification floaters contributed about 97.2% 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 $486 million and $251 million, respectively.
Revenue efficiency was 98%, in line with the first quarter. The figure reflected an increase from the year-ago level of 97%.
Dayrates and Utilization
On an encouraging note, average dayrate in the quarter under review rose to $314,900 from the year-ago level of $308,300, owing to an uptick in activity in the Asia Pacific, Brazil and GoM. The company witnessed y/y higher average revenue per day from harsh environment and midwater floaters. Overall fleet utilization was 56% during the quarter, down from the utilization rate of 57% in the year-ago period.
Backlog
Transocean’s backlog, which was recorded at $11.4 billion as of Jul 25, reflects a decline of $300 million from the year-ago period. During the second quarter, the company added approximately $158 million to its backlog.
Costs, Capex & Balance Sheet
Transocean’s operating and maintenance expenses rose 11.5% year over year to $774 million. Operating and maintenance costs also increased to $510 million from $431 million in the year-ago quarter. Transocean spent $86 million on capital expenditure in the second quarter of 2019. Cash provided by operating activities totaled $153 million, resulting in a positive free cash flow of $67 million. It had cash and cash equivalents of $2.2 billion on Jun 30, 2019. Long-term debt was $9.4 billion, with a debt-to-capitalization ratio of 42.3% as of the same date.
Guidance
For the third quarter, the company expects operating and maintenance expenses of $575 million. Full-year operating and maintenance costs are expected to be around $2.1 billion. Capital spending is likely to be around $215 million (including $120 million to be spent on under-construction newbuilds) in the third quarter.
Zacks Rank & Key Picks
Currently, Transocean has a Zacks Rank #3 (Hold). Some better-ranked players from the same industry are TC PipeLines, LP , MPLX LP (MPLX - Free Report) and Oasis Midstream Partners LP , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>