UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): August 5, 2009 (August 5, 2009)

 

 

TRANSOCEAN LTD.

(Exact name of registrant as specified in its charter)

 

 

 

Switzerland		000-53533		98-0599916
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

Blandonnet International Business Center Building F, 7th Floor Chemin de Blandonnet 2 Vernier, Switzerland		CH-1214
(Address of principal executive offices)		(zip code)

Registrant’s telephone number, including area code: +41 (22) 930-9000

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02.

Results of Operations and Financial Condition.

Our news release dated August 5, 2009, concerning second quarter 2009 financial results, furnished as Exhibit 99.1 to this report, is incorporated by reference herein. The press release contains certain measures (discussed below) which may be deemed “non-GAAP financial measures” as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended.

In the press release, we discuss field operating income for the three months ended June 30, 2009, March 31, 2009 and June 30, 2008; and for the six months ended June 30, 2009 and June 30, 2008. Management believes field operating income is a useful measure of operating results since the measure only deducts expenses directly related to operations from revenues. The most directly comparable GAAP financial measure, operating income before general and administrative expenses, and information reconciling the GAAP and non-GAAP measures are included in the press release.

 

Item 7.01.

Regulation FD Disclosure.

Slide Presentation

On August 5, 2009, we are posting the slide presentation furnished as Exhibit 99.2 to this report on our website at www.deepwater.com. Exhibit 99.2 is incorporated in this Item 7.01 by reference.

Statements contained within the slide presentation that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include but are not limited to projections relating to out-of-service forecasts, operating and maintenance costs trends, contract backlog, and other statements that are not historical facts. Such statements are subject to numerous risks, uncertainties and assumptions, including but not limited to, uncertainties relating to the level of activity in offshore oil and gas exploration and development, exploration success by producers, oil and gas prices, rig demand and capacity, drilling industry market conditions, possible delays or cancellation of drilling contracts, work stoppages, operational or other downtime, the Company’s ability to enter into and the terms of future contracts, the availability of qualified personnel, labor relations, future financial results, operating hazards, political and other uncertainties inherent in non-U.S. operations (including exchange and currency fluctuations), war, terrorism, natural disaster and cancellation or unavailability of insurance coverage, the impact of governmental laws and regulations, the adequacy of sources of liquidity, the effect of litigation and contingencies and other factors discussed in the Company’s Form 10-K for the year ended December 31, 2008, and in the Company’s other filings with the Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC’s website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. We caution investors not to place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.

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Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

The exhibits to this report furnished pursuant to items 2.02, and 7.01 are as follows:

 

Exhibit No.		Description
99.1		Transocean Ltd. Release Reporting Second Quarter 2009 Financial Results
99.2		Slide Presentation

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		TRANSOCEAN LTD.
Date: August 5, 2009		By		/s/ Margaret C. Fitzgerald
				Margaret C. Fitzgerald
				Associate General Counsel

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Index to Exhibits

 

Exhibit Number		Description
99.1		Transocean Ltd. Release Reporting Second Quarter 2009 Financial Results
99.2		Slide Presentation

Exhibit 99.1

 

						Transocean Ltd. Investor Relations and Communications Dept.
Analyst Contact:		Gregory S. Panagos + 1 713-232-7551				News Release FOR RELEASE: August 5, 2009
Media Contact:		Guy A. Cantwell +1 713-232-7647

TRANSOCEAN LTD. REPORTS

SECOND QUARTER 2009 FINANCIAL RESULTS

ZUG, SWITZERLAND—Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest for the three months ended June 30, 2009 of $806 million, or $2.49 per diluted share, compared to net income attributable to controlling interest of $1.065 billion, or $3.31 per diluted share for the three months ended June 30, 2008. Revenues for the second quarter of 2009 were $2.882 billion compared to $3.102 billion for the second quarter of 2008.

Second quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $96 million, or $0.30 per diluted share, as follows:

 

•

$67 million of write-downs to fair market value for the GSF Arctic II and GSF Arctic IV semisubmersible rigs held for sale, as well as an impairment of an intangible asset related to drilling management services, and

 

•

A $29 million net loss primarily related to discrete tax items, the retirement of debt, the sale of an interest in a joint venture and expenses associated with the merger of Transocean and GlobalSantaFe.

Operations Quarterly Review

Revenues for the three months ended June 30, 2009 decreased 7.6 percent to $2.882 billion compared to revenues of $3.118 billion during the three months ended March 31, 2009. Of the $236 million quarter-to-quarter decrease, $209 million primarily reflected a decline in rig utilization across all rig categories, primarily related to the stacking of jackup and midwater units, a planned increase in shipyard activity and downtime resulting from unplanned operational events. Non-cash contract drilling intangible revenues also declined $29 million, compared to the first quarter 2009.

Operating and maintenance expenses for the three months ended June 30, 2009 were $1.277 billion compared to $1.171 billion for the prior three-month period, an increase of $106 million or 9.1 percent. The quarter-to-quarter increase in operating and maintenance costs consisted of $87 million related to an increase in shipyard and maintenance costs and increased costs related to newbuild rigs about to commence operations, partially offset by reduced operating costs due to stacked rigs.

General and administrative expenses decreased 5.4 percent to $53 million for the second quarter of 2009 compared to $56 million for the first quarter 2009. The decrease primarily reflects a $4 million decline in expenses related to the merger with GlobalSantaFe.

Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the second quarter of 2009 totaled $114 million compared to $136 million for the first quarter of 2009. The decrease in interest expense primarily related to lower average outstanding debt balances during the quarter compared to the first quarter 2009.

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As of June 30, 2009, total debt was $12.053 billion, compared to total debt of $12.964 billion as of March 31, 2009, a decrease of $911 million.

Cash flow from operating activities totaled $1.576 billion for the second quarter of 2009 compared to $1.441 billion for the first quarter of 2009.

Effective Tax Rate

Transocean’s reported Effective Tax Rate⁽¹⁾ of 18.5 percent for the second quarter of 2009 reflects various discrete tax items of $16 million which primarily resulted from changes in estimates, as well as the impact of the write-down of rigs to fair market value, as described above. Excluding these items, the Annual Effective Tax Rate⁽²⁾ for the second quarter of 2009 was 15.7 percent versus 15.2 percent in the first quarter of 2009.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern time, 4:00 p.m. Swiss time, today. To participate, dial +1 (913) 981-4904 and refer to confirmation code 9249616 approximately five to 10 minutes prior to the scheduled start time of the call.

In addition, the conference call will be simultaneously broadcast in a listen-only mode over the Internet and can be accessed by logging onto the company’s Web address at www.deepwater.com and selecting “Investor Relations.” It may also be accessed at www.CompanyBoardroom.com by typing in Transocean’s New York Stock Exchange trading symbol, “RIG.” A file containing five charts to be discussed during the conference call, titled “2Q09 Charts,” has been posted to Transocean’s Web site and can be found by selecting “Investor Relations.”

A telephonic replay of the conference call should be available after 1:00 p.m. ET, 7:00 p.m. Swiss time, on August 5, 2009 and can be accessed by dialing +1 (719) 457-0820 and referring to the passcode 9249616. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Both replay options will be available for approximately 30 days.

Transocean is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 133 mobile offshore drilling units plus 10 announced ultra-deepwater newbuild units, Transocean’s fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. Transocean owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 26 Midwater Floaters, 10 High-Specification Jackups, 55 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

 

(1)	Effective Tax Rate is defined as income tax expense divided by income before income taxes. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

(2)

Annual Effective Tax Rate is defined as income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

 

		###		09-22

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2009				2008				2009				2008
						(As adjusted)								(As adjusted)
Operating revenues
Contract drilling revenues		$	2,625			$	2,596			$	5,459			$	5,227
Contract drilling intangible revenues			75				190				179				414
Other revenues			182				316				362				571
			2,882				3,102				6,000				6,212
Costs and expenses
Operating and maintenance			1,277				1,364				2,448				2,521
Depreciation, depletion and amortization			360				337				715				704
General and administrative			53				45				109				94
			1,690				1,746				3,272				3,319
Impairment loss			(67	)			—				(288	)			—
Loss from disposal of assets, net			(4	)			(6	)			—				(3	)
Operating income			1,121				1,350				2,440				2,890
Other income (expense), net
Interest income			1				10				2				23
Interest expense, net of amounts capitalized			(114	)			(153	)			(250	)			(330	)
Loss on retirement of debt			(8	)			(1	)			(10	)			(3	)
Other, net			(8	)			(2	)			—				(8	)
			(129	)			(146	)			(258	)			(318	)
Income before income tax expense			992				1,204				2,182				2,572
Income tax expense			184				140				435				358
Net income			808				1,064				1,747				2,214
Net income (loss) attributable to noncontrolling interest			2				(1	)			(1	)			—
Net income attributable to controlling interest		$	806			$	1,065			$	1,748			$	2,214
Earnings per share
Basic		$	2.50			$	3.34			$	5.43			$	6.95
Diluted		$	2.49			$	3.31			$	5.42			$	6.89
Weighted average shares outstanding
Basic			320				318				320				318
Diluted			321				321				321				321

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

 

		June 30, 2009				December 31, 2008
						(As adjusted)
ASSETS
Cash and cash equivalents		$	907			$	963
Short-term investments			174				333
Accounts receivable, net of allowance for doubtful accounts of $52 and $114 at June 30, 2009 and December 31, 2008, respectively			2,674				2,864
Materials and supplies, net of allowance for obsolescence of $57 and $49 at June 30, 2009 and December 31, 2008, respectively			451				432
Deferred income taxes, net			46				63
Assets held for sale			186				464
Other current assets			192				230
Total current assets			4,630				5,349
Property and equipment			27,275				25,836
Less accumulated depreciation			5,624				4,975
Property and equipment, net			21,651				20,861
Goodwill			8,134				8,128
Other assets			842				844
Total assets		$	35,257			$	35,182
LIABILITIES AND EQUITY
Accounts payable		$	829			$	914
Accrued income taxes			235				317
Debt due within one year			1,163				664
Other current liabilities			732				806
Total current liabilities			2,959				2,701
Long-term debt			10,890				12,893
Deferred income taxes, net			699				666
Other long-term liabilities			1,714				1,755
Total long-term liabilities			13,303				15,314
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947 authorized, 167,617,649 contingently authorized, 335,235,298 issued and 320,953,074 outstanding at June 30, 2009 and 502,852,947 authorized, 167,617,649 contingently authorized, 335,235,298 issued and 319,262,113 outstanding at December 31, 2008			4,468				4,444
Additional paid-in capital			7,388				7,313
Retained earnings			7,575				5,827
Accumulated other comprehensive loss			(449	)			(420	)
Total controlling interest shareholders’ equity			18,982				17,164
Noncontrolling interest			13				3
Total equity			18,995				17,167
Total liabilities and equity		$	35,257			$	35,182

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2009				2008				2009				2008
						(As adjusted)								(As adjusted)
Cash flows from operating activities
Net income		$	808			$	1,064			$	1,747			$	2,214
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of drilling contract intangibles			(75	)			(190	)			(179	)			(414	)
Depreciation, depletion and amortization			360				337				715				704
Share-based compensation expense			24				11				43				33
Excess tax benefit from share-based compensation plans			—				(8	)			(1	)			(11	)
Loss from disposal of assets, net			4				6				—				3
Impairment loss			67				—				288				—
Loss on retirement of debt			8				1				10				3
Amortization of debt issue costs, discounts and premiums, net			57				44				109				85
Deferred revenue, net			49				7				43				25
Deferred expenses, net			(37	)			(145	)			(35	)			(129	)
Deferred income taxes			20				(31	)			26				(56	)
Other, net			14				(7	)			23				(8	)
Changes in operating assets and liabilities			277				(78	)			228				44
Net cash provided by operating activities			1,576				1,011				3,017				2,493
Cash flows from investing activities
Capital expenditures			(947	)			(420	)			(1,655	)			(1,189	)
Proceeds from disposal of assets, net			—				93				8				347
Proceeds from short-term investments			172				—				393				—
Purchases of short-term investments			(234	)			—				(234	)			—
Joint ventures and other investments, net			—				—				—				(3	)
Net cash used in investing activities			(1,009	)			(327	)			(1,488	)			(845	)
Cash flows from financing activities
Change in short-term borrowings, net			(476	)			(351	)			(500	)			(355	)
Proceeds from debt			231				75				319				2,051
Repayments of debt			(708	)			(1,040	)			(1,410	)			(3,673	)
Payments for warrant exercises, net			(13	)			—				(13	)			(4	)
Proceeds from share-based compensation plans, net			5				34				22				61
Excess tax benefit from share-based compensation plans			—				8				1				11
Other, net			(1	)			(1	)			(4	)			(4	)
Net cash used in financing activities			(962	)			(1,275	)			(1,585	)			(1,913	)
Net decrease in cash and cash equivalents			(395	)			(591	)			(56	)			(265	)
Cash and cash equivalents at beginning of period			1,302				1,567				963				1,241
Cash and cash equivalents at end of period		$	907			$	976			$	907			$	976

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TRANSOCEAN LTD.

FLEET OPERATING STATISTICS

 

		Operating Revenues ($ Millions) (1)
		Three months ended												Six months ended June 30,
		June 30, 2009				March 31, 2009				June 30, 2008				2009				2008
Contract Drilling Revenues
High-Specification Floaters:
Ultra Deepwater Floaters		$	673			$	702			$	558			$	1,375			$	1,166
Deepwater Floaters			406				413				377				819				702
Harsh Environment Floaters			159				158				168				317				318
Total High-Specification Floaters			1,238				1,273				1,103				2,511				2,186
Midwater Floaters			644				708				650				1,352				1,325
High-Specification Jackups			128				151				148				278				304
Standard Jackups			608				689				674				1,298				1,385
Other Rigs			7				13				21				20				27
Subtotal			2,625				2,834				2,596				5,459				5,227
Contract Intangible Revenue			75				104				190				179				414
Other Revenues
Client Reimbursable Revenues			48				50				50				98				98
Integrated Services and Other			52				53				35				105				78
Drilling Management Services			74				70				214				145				353
Oil and Gas Properties			8				7				17				14				42
Subtotal			182				180				316				362				571
Total Company		$	2,882			$	3,118			$	3,102			$	6,000			$	6,212
		Average Dayrates (1)
		Three months ended												Six months ended June 30,
		June 30, 2009				March 31, 2009				June 30, 2008				2009				2008
High-Specification Floaters:
Ultra Deepwater Floaters		$	450,500			$	451,000			$	390,400			$	450,800			$	385,300
Deepwater Floaters		$	339,600			$	336,900			$	317,400			$	338,200			$	301,100
Harsh Environment Floaters		$	374,500			$	351,100			$	379,400			$	362,500			$	361,900
Total High-Specification Floaters		$	397,600			$	393,800			$	360,500			$	395,700			$	350,500
Midwater Floaters		$	302,700			$	314,700			$	299,300			$	308,900			$	295,700
High-Specification Jackups		$	161,400			$	169,500			$	178,000			$	165,700			$	175,800
Standard Jackups		$	149,200			$	156,400			$	149,400			$	152,900			$	147,700
Other Rigs		$	48,300			$	46,700			$	77,400			$	47,300			$	49,100
Total Drilling Fleet		$	255,900			$	256,500			$	239,300			$	256,200			$	233,700
		Utilization (1)
		Three months ended												Six months ended June 30,
		June 30, 2009				March 31, 2009				June 30, 2008				2009				2008
High-Specification Floaters:
Ultra Deepwater Floaters			91	%			96	%			87	%			94	%			92	%
Deepwater Floaters			82	%			85	%			81	%			84	%			80	%
Harsh Environment Floaters			93	%			100	%			98	%			96	%			97	%
Total High-Specification Floaters			88	%			92	%			86	%			90	%			88	%
Midwater Floaters			84	%			89	%			82	%			86	%			85	%
High-Specification Jackups			87	%			99	%			91	%			93	%			95	%
Standard Jackups			82	%			89	%			89	%			85	%			91	%
Other Rigs			59	%			99	%			100	%			80	%			100	%
Total Drilling Fleet			84	%			91	%			87	%			87	%			89	%

 

(1)

Average daily revenue is defined as contract drilling revenue earned per revenue earning day in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement of operations. Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in our fleet.

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Transocean Ltd. and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Operating Income Before General and Administrative Expense

to Field Operating Income

(In millions)

 

		Three months ended										Six months ended
		June 30, 2009			March 31, 2009				June 30, 2008			June 30, 2009			June 30, 2008
Operating revenue		$	2,882		$	3,118			$	3,102		$	6,000		$	6,212
Operating and maintenance expense			1,277			1,171				1,364			2,448			2,521
Depreciation, depletion and amortization			360			355				337			715			704
Impairment Loss			67			221				—			288			—
(Gain) loss from disposal of assets, net			4			(4	)			6			—			3
Operating income before general and administrative expense			1,174			1,375				1,395			2,549			2,984
Add back (subtract):
Depreciation, depletion and amortization			360			355				337			715			704
Impairment Loss			67			221				—			288			—
(Gain) loss from disposal of assets, net			4			(4	)			6			—			3
Field operating income		$	1,605		$	1,947			$	1,738		$	3,552		$	3,691

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Transocean Ltd. and Subsidiaries

Supplemental Effective Tax Rate Analysis

(In millions)

 

		Three months ended												Six months ended
		June 30, 2009				Mar. 31, 2009				June 30, 2008				June 30, 2009				June 30, 2008
										(As Adjusted)								(As Adjusted)
Income before income taxes and minority interest		$	992			$	1,190			$	1,204			$	2,182			$	2,572
Add back (subtract):
Impairment loss			67				221				—				288				—
Loss on sale of CDC interest			4				—				—				4				—
Gain on sale of Sedco 135D rig & inventory			(1	)			—				—				(1	)			—
GSF Merger related costs			2				6				3				8				4
Loss on retirement of debt			8				2				1				10				3
Adjusted income before income taxes			1,072				1,419				1,208				2,491				2,579
Income tax expense			184				251				140				435				358
Add back (subtract):
GSF Merger related costs			—				1				—				1				—
Changes in estimates (1)			(16	)			(36	)			2				(52	)			(25	)
Adjusted income tax expense (2)		$	168			$	216			$	142			$	384			$	333
Effective Tax Rate (3)			18.5	%			21.1	%			11.6	%			19.9	%			13.9	%
Annual Effective Tax Rate (4)			15.7	%			15.2	%			11.8	%			15.4	%			12.9	%

 

(1)	Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in deferred taxes valuation allowances on deferred taxes and other tax liabilities.

(2)	The three months ended June 30, 2009 include $3 million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate.

(3)	Effective Tax Rate is income tax expense divided by income before income taxes.

(4)

Annual Effective Tax Rate is income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18.

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