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): May 5, 2010 (May 5, 2010)
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 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)) |
Item 2.02. Results of Operations and Financial Condition.
Our news release dated May 5, 2010, concerning first quarter 2010 financial results, furnished as Exhibit 99.1 to this report, is incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibit to this report furnished pursuant to item 2.02, is as follows:
| Exhibit No. |
Description | |
| 99.1 | Transocean Ltd. Release Reporting First Quarter 2010 Financial Results | |
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: May 5, 2010 | By | /s/ Margaret C. Fitzgerald | ||
| Margaret C. Fitzgerald | ||||
| Associate General Counsel | ||||
Index to Exhibits
| Exhibit Number |
Description | |
| 99.1 | Transocean Ltd. Release Reporting First Quarter 2010 Financial Results | |
Exhibit 99.1
|
|
Transocean Ltd. Investor Relations and Communications Dept. | |
| Analyst Contact: | Gregory S. Panagos | News Release | ||
| +1 713-232-7551 | ||||
| Media Contact: | Guy A. Cantwell | FOR RELEASE: May 5, 2010 | ||
| +1 713-232-7647 |
TRANSOCEAN LTD. REPORTS
FIRST QUARTER 2010 RESULTS
ZUG, SWITZERLAND—Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest of $677 million, or $2.09 per diluted share, on revenues of $2.602 billion for the three months ended March 31, 2010. The results compare to net income attributable to controlling interest of $942 million, or $2.93 per diluted share, on revenues of $3.118 billion for the three months ended March 31, 2009.
First quarter 2010 results were adversely impacted by certain net charges, after tax, totaling $42 million, or $0.13 per diluted share, as follows:
| • | $15 million loss on the sale of GSF Arctic II and GSF Arctic IV, |
| • | $16 million primarily regarding impairment charges related to accelerated depletion of certain oil and gas properties, and, |
| • | $11 million of net charges primarily related to discrete tax items |
First quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $264 million, or $0.82 per diluted share, consisting of $221 million of impairments on rigs held for sale and $43 million of discrete tax items, merger-related costs and losses on the retirement of debt.
Operations Quarterly Review
Revenues for the three months ended March 31, 2010 decreased to $2.602 billion compared to $2.733 billion during the three months ended December 31, 2009. The $131 million decrease was primarily due to a $78 million reduction in contract drilling revenue resulting from the stacking of rigs in the previous quarter, a $78 million reduction in revenue from increased rig time in shipyard and mobilizations partially offset by a $49 million increase in revenue from newly constructed ultra-deepwater rigs commencing or continuing operations in the quarter.
Operating and maintenance expenses totaled $1.196 billion for the first quarter 2010, down approximately eight percent compared to $1.296 billion for the prior quarter. The $100 million quarter-to-quarter reduction in operating and maintenance costs occurred as a result of a $123 million reduction primarily in maintenance costs and a $21 million reduction in costs related to stacked rigs. These items were partially offset by a favorable impact in the prior quarter from litigation settlements and $17 million of costs in the first quarter related to the after-sale chartering of the GSF Arctic IV and $15 million of additional operating costs related to newly constructed ultra-deepwater rigs.
Depreciation, depletion and amortization expense was $401 million in the first quarter 2010, up five percent compared to $382 million for the fourth quarter 2009. The $19 million increase was primarily due to impairments related to our oil and gas properties and the commencement of operations of newly constructed ultra-deepwater rigs.
General and administrative expenses were $63 million for the first quarter 2010, compared to $46 million in the prior quarter. The $17 million increase was primarily due to an accelerated vesting and new awards of share-based compensation.
Liquidity and Interest Expense
Interest expense, net of amounts capitalized for the first quarter 2010 totaled $132 million, compared to $119 million in the prior quarter. The increase was primarily due to reduced capitalized interest related to the commencement of operations of newly constructed ultra-deepwater drillships in the fourth and first quarters. As of March 31, 2010, total debt was $11.439 billion, compared to $11.717 billion as of December 31, 2009, a decrease of $278 million reflecting $213 million repayment of joint venture debt, lower outstanding commercial paper program borrowings and the early retirement of the GSF Explorer capital lease.
Cash flow from operating activities totaled $1.172 billion for the first quarter 2010, in line with $1.175 billion generated in the fourth quarter 2009.
Effective Tax Rate
Transocean’s reported Effective Tax Rate( 1) , which includes various discrete items primarily resulting from the impact of oil and gas impairments and changes in prior years tax estimates, for the first quarter 2010 was 15.8 percent. Excluding these discrete items the Annual Effective Tax Rate( 2) for the first quarter was 15.0 percent.
Update on Deepwater Horizon Incident
Concurrently with this press release, we have filed a Quarterly Report on Form 10-Q with the United States Securities and Exchange Commission. The form 10-Q includes updated information on the Deepwater Horizon incident. To view the Form 10-Q filing, please use the following link: http://www.deepwater.com/fw/main/SEC-Filings-57.html.
Conference Call Information
Transocean will conduct a teleconference call at 10:00 a.m. ET, 4:00 p.m. Swiss time, on May 6, 2010. To participate, dial +1 913-312-0650 and refer to confirmation code 4091491 approximately five to 10 minutes prior to the scheduled start time of the call.
In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto Transocean’s website at www.deepwater.com and selecting “Investor Relations.” A file containing four charts to be discussed during the conference call, titled “1Q10 Charts,” has been posted to Transocean’s website and can also be found by selecting “Investor Relations/Quarterly Toolkit.” The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean’s New York Stock Exchange trading symbol, “RIG.”
A telephonic replay of the conference call should be available after 1:00 p.m. ET, 7:00 p.m. Swiss time, on May 6, and can be accessed by dialing +1 719-457-0820 and referring to the passcode 4091491. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.
Transocean is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 139 mobile offshore drilling units plus three ultra-deepwater units under construction, 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 45 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 tax expense) divided by income before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”
| ### | 10- |
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
| Three months ended March 31, |
||||||||
| 2010 | 2009 | |||||||
| Operating revenues |
||||||||
| Contract drilling revenues |
$ | 2,441 | $ | 2,834 | ||||
| Contract drilling intangible revenues |
33 | 104 | ||||||
| Other revenues |
128 | 180 | ||||||
| 2,602 | 3,118 | |||||||
| Costs and expenses |
||||||||
| Operating and maintenance |
1,196 | 1,171 | ||||||
| Depreciation, depletion and amortization |
401 | 355 | ||||||
| General and administrative |
63 | 56 | ||||||
| 1,660 | 1,582 | |||||||
| Loss on impairment |
(2 | ) | (221 | ) | ||||
| Gain (loss) on disposal of assets, net |
(14 | ) | 4 | |||||
| Operating income |
926 | 1,319 | ||||||
| Other income (expense), net |
||||||||
| Interest income |
5 | 1 | ||||||
| Interest expense, net of amounts capitalized |
(132 | ) | (136 | ) | ||||
| Other, net |
15 | 6 | ||||||
| (112 | ) | (129 | ) | |||||
| Income before income tax expense |
814 | 1,190 | ||||||
| Income tax expense |
129 | 251 | ||||||
| Net income |
685 | 939 | ||||||
| Net income (loss) attributable to noncontrolling interest |
8 | (3 | ) | |||||
| Net income attributable to controlling interest |
$ | 677 | $ | 942 | ||||
| Earnings per share |
||||||||
| Basic |
$ | 2.10 | $ | 2.94 | ||||
| Diluted |
$ | 2.09 | $ | 2.93 | ||||
| Weighted-average shares outstanding |
||||||||
| Basic |
321 | 319 | ||||||
| Diluted |
322 | 320 | ||||||
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
| March 31, 2010 |
December 31, 2009 |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 1,586 | $ | 1,130 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $41 and $65 at March 31, 2010 and December 31, 2009, respectively |
2,285 | 2,385 | ||||||
| Materials and supplies, net of allowance for obsolescence of $64 and $66 at March 31, 2010 and December 31, 2009, respectively |
464 | 462 | ||||||
| Deferred income taxes, net |
113 | 104 | ||||||
| Assets held for sale |
— | 186 | ||||||
| Other current assets |
263 | 209 | ||||||
| Total current assets |
4,711 | 4,476 | ||||||
| Property and equipment |
27,604 | 27,383 | ||||||
| Property and equipment of consolidated variable interest entities |
2,149 | 1,968 | ||||||
| Less accumulated depreciation |
6,728 | 6,333 | ||||||
| Property and equipment, net |
23,025 | 23,018 | ||||||
| Goodwill |
8,132 | 8,134 | ||||||
| Other assets |
970 | 808 | ||||||
| Total assets |
$ | 36,838 | $ | 36,436 | ||||
| Liabilities and equity |
||||||||
| Accounts payable |
$ | 746 | $ | 780 | ||||
| Accrued income taxes |
240 | 240 | ||||||
| Debt due within one year |
1,447 | 1,568 | ||||||
| Debt of consolidated variable interest entities due within one year |
82 | 300 | ||||||
| Other current liabilities |
787 | 730 | ||||||
| Total current liabilities |
3,302 | 3,618 | ||||||
| Long-term debt |
8,990 | 8,966 | ||||||
| Long-term debt of consolidated variable interest entities |
920 | 883 | ||||||
| Deferred income taxes, net |
713 | 726 | ||||||
| Other long-term liabilities |
1,707 | 1,684 | ||||||
| Total long-term liabilities |
12,330 | 12,259 | ||||||
| Commitments and contingencies |
||||||||
| Shares, CHF 15.00 par value, 502,852,947 authorized, 167,617,649 conditionally authorized, 335,235,298 issued at March 31, 2010 and December 31, 2009; 320,950,624 and 321,223,882 outstanding at March 31, 2010 and December 31, 2009, respectively |
4,478 | 4,472 | ||||||
| Additional paid-in capital |
7,433 | 7,407 | ||||||
| Retained earnings |
9,685 | 9,008 | ||||||
| Accumulated other comprehensive loss |
(338 | ) | (335 | ) | ||||
| Treasury shares, at cost, 717,000 and none held at March 31, 2010 and December 31, 2009, respectively |
(60 | ) | — | |||||
| Total controlling interest shareholders’ equity |
21,198 | 20,552 | ||||||
| Noncontrolling interest |
8 | 7 | ||||||
| Total equity |
21,206 | 20,559 | ||||||
| Total liabilities and equity |
$ | 36,838 | $ | 36,436 | ||||
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Three months ended March 31, |
||||||||
| 2010 | 2009 | |||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 685 | $ | 939 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
| Amortization of drilling contract intangibles |
(33 | ) | (104 | ) | ||||
| Depreciation, depletion and amortization |
401 | 355 | ||||||
| Share-based compensation expense |
35 | 19 | ||||||
| (Gain) loss on disposal of assets, net |
14 | (4 | ) | |||||
| Loss on impairment |
2 | 221 | ||||||
| Amortization of debt issue costs, discounts and premiums, net |
49 | 52 | ||||||
| Deferred income taxes |
(22 | ) | 6 | |||||
| Other, net |
3 | 11 | ||||||
| Deferred revenue, net |
151 | (6 | ) | |||||
| Deferred expenses, net |
(14 | ) | 2 | |||||
| Changes in operating assets and liabilities |
(99 | ) | (50 | ) | ||||
| Net cash provided by operating activities |
1,172 | 1,441 | ||||||
| Cash flows from investing activities |
||||||||
| Capital expenditures |
(379 | ) | (708 | ) | ||||
| Proceeds from disposal of assets, net |
41 | 8 | ||||||
| Proceeds from distributions from short-term investments |
5 | 221 | ||||||
| Joint ventures and other investments, net |
10 | — | ||||||
| Net cash used in investing activities |
(323 | ) | (479 | ) | ||||
| Cash flows from financing activities |
||||||||
| Change in short-term borrowings, net |
(131 | ) | (24 | ) | ||||
| Proceeds from debt |
54 | 88 | ||||||
| Repayments of debt |
(253 | ) | (600 | ) | ||||
| Repurchases of convertible senior notes |
— | (102 | ) | |||||
| Purchases of treasury shares |
(60 | ) | — | |||||
| Proceeds from (taxes paid for) share-based compensation plans, net |
(4 | ) | 17 | |||||
| Other, net |
1 | (2 | ) | |||||
| Net cash used in financing activities |
(393 | ) | (623 | ) | ||||
| Net increase in cash and cash equivalents |
456 | 339 | ||||||
| Cash and cash equivalents at beginning of period |
1,130 | 963 | ||||||
| Cash and cash equivalents at end of period |
$ | 1,586 | $ | 1,302 | ||||
TRANSOCEAN LTD.
FLEET OPERATING STATISTICS
| Operating Revenues ($ Millions) | ||||||||||||
| Three months ended | ||||||||||||
| March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
| Contract Drilling Revenues |
||||||||||||
| High-Specification Floaters: |
||||||||||||
| Ultra Deepwater Floaters |
$ | 901 | $ | 890 | $ | 702 | ||||||
| Deepwater Floaters |
390 | 449 | 413 | |||||||||
| Harsh Environment Floaters |
176 | 155 | 158 | |||||||||
| Total High-Specification Floaters |
1,467 | 1,494 | 1,273 | |||||||||
| Midwater Floaters |
522 | 537 | 708 | |||||||||
| High-Specification Jackups |
94 | 86 | 151 | |||||||||
| Standard Jackups |
352 | 422 | 689 | |||||||||
| Other Rigs |
6 | 7 | 13 | |||||||||
| Subtotal |
2,441 | 2,546 | 2,834 | |||||||||
| Contract Intangible Revenue |
33 | 44 | 104 | |||||||||
| Other Revenues |
||||||||||||
| Client Reimbursable Revenues |
40 | 46 | 50 | |||||||||
| Integrated Services and Other |
30 | 48 | 53 | |||||||||
| Drilling Management Services |
51 | 41 | 70 | |||||||||
| Oil and Gas Properties |
7 | 8 | 7 | |||||||||
| Subtotal |
128 | 143 | 180 | |||||||||
| Total Company |
$ | 2,602 | $ | 2,733 | $ | 3,118 | ||||||
| Average Daily Revenue (1) | ||||||||||||
| Three months ended | ||||||||||||
| March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
| High-Specification Floaters: |
||||||||||||
| Ultra Deepwater Floaters |
$ | 486,000 | $ | 486,200 | $ | 451,000 | ||||||
| Deepwater Floaters |
$ | 383,800 | $ | 346,600 | $ | 336,900 | ||||||
| Harsh Environment Floaters |
$ | 400,100 | $ | 405,800 | $ | 351,100 | ||||||
| Total High-Specification Floaters |
$ | 437,200 | $ | 425,900 | $ | 393,800 | ||||||
| Midwater Floaters |
$ | 331,600 | $ | 325,100 | $ | 314,700 | ||||||
| High-Specification Jackups |
$ | 166,000 | $ | 175,100 | $ | 169,500 | ||||||
| Standard Jackups |
$ | 133,100 | $ | 147,300 | $ | 156,400 | ||||||
| Other Rigs |
$ | 72,700 | $ | 72,300 | $ | 46,700 | ||||||
| Total Drilling Fleet |
$ | 298,300 | $ | 295,700 | $ | 256,500 | ||||||
| Utilization (1) | ||||||||||||
| Three Months Ended | ||||||||||||
| March 31, 2010 |
December 31, 2009 |
March 31, 2009 |
||||||||||
| High-Specification Floaters: |
||||||||||||
| Ultra Deepwater Floaters |
88 | % | 91 | % | 96 | % | ||||||
| Deepwater Floaters |
71 | % | 88 | % | 85 | % | ||||||
| Harsh Environment Floaters |
98 | % | 83 | % | 100 | % | ||||||
| Total High-Specification Floaters |
84 | % | 89 | % | 92 | % | ||||||
| Midwater Floaters |
67 | % | 69 | % | 89 | % | ||||||
| High-Specification Jackups |
63 | % | 53 | % | 99 | % | ||||||
| Standard Jackups |
53 | % | 57 | % | 89 | % | ||||||
| Other Rigs |
50 | % | 50 | % | 99 | % | ||||||
| Total Drilling Fleet |
66 | % | 69 | % | 91 | % | ||||||
| (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. |
TRANSOCEAN LTD. AND SUBSIDIARIES
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS
(In millions, except percentages)
| Three months ended | ||||||||||||
| Mar 31, 2010 |
Dec 31, 2009 |
Mar 31, 2009 |
||||||||||
| Income before income taxes |
$ | 814 | $ | 898 | $ | 1,190 | ||||||
| Add back (subtract): |
||||||||||||
| Loss on impairment of oil and gas properties |
21 | — | — | |||||||||
| Loss on impairment of goodwill |
2 | — | — | |||||||||
| Loss on disposal of assets |
14 | — | — | |||||||||
| Loss on impairment on the Reserve funds |
1 | — | — | |||||||||
| (Gain) loss on retirement of debt |
(2 | ) | 12 | 2 | ||||||||
| GSF merger related costs and other, net |
5 | 5 | 6 | |||||||||
| Litigation matters |
— | (24 | ) | — | ||||||||
| Income from TODCO tax sharing agreement |
— | (1 | ) | — | ||||||||
| Gain on sale of interests in joint ventures |
— | (34 | ) | — | ||||||||
| Loss on impairment of assets held for sale |
— | — | 221 | |||||||||
| Adjusted income before income taxes |
855 | 856 | 1,419 | |||||||||
| Income tax expense |
129 | 181 | 251 | |||||||||
| Add back (subtract): |
||||||||||||
| Loss on impairment of oil and gas properties |
7 | — | — | |||||||||
| GSF merger related costs |
1 | — | 1 | |||||||||
| Tax effect of the Patient Protection and Affordable Care Act |
(2 | ) | — | — | ||||||||
| Loss on impairment |
— | 18 | — | |||||||||
| Changes in estimates (1) |
(7 | ) | (50 | ) | (37 | ) | ||||||
| Adjusted income tax expense (2) |
$ | 128 | $ | 149 | $ | 215 | ||||||
| Effective Tax Rate (3) |
15.8 | % | 20.1 | % | 21.1 | % | ||||||
| Annual Effective Tax Rate (4) |
15.0 | % | 17.4 | % | 15.2 | % | ||||||
| (1) | Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities. |
| (2) | The three months ended December 31, 2009 include $11 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 and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. |