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): November 5, 2008 (November 5, 2008)

TRANSOCEAN INC.

(Exact name of registrant as specified in its charter)

 

Cayman Islands		333-75899		66-0582307
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

4 Greenway Plaza
Houston, Texas		77046
(Address of principal executive offices)		(zip code)

 

70 Harbour Drive
Grand Cayman, Cayman Islands		KY1-1003
(Address of principal executive offices)		(zip code)

Registrant’s telephone number, including area code: (713) 232-7500

 

(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 November 5, 2008, concerning third quarter 2008 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 present field operating income for the three months ended September 30, 2008, June 30, 2008 and September 30, 2007 and for the nine months ended September 30, 2008, and September 30, 2007. 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 November 5, 2008, 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, 2007, 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 Inc. Release Reporting Third Quarter 2008 Financial Results
99.2		Slide Presentation

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 INC.
Date: November 5, 2008				By		/s/ Eric B. Brown
						Eric B. Brown
						Senior Vice President and General Counsel

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Index to Exhibits

 

Exhibit Number		Description
99.1		Transocean Inc. Release Reporting Third Quarter 2008 Financial Results
99.2		Slide Presentation

Exhibit 99.1

 

						Transocean Inc. Post Office Box 2765 Houston TX 77252 2765
Analyst Contact:		Gregory S. Panagos 713-232-7551				News Release
Media Contact:		Guy A. Cantwell 713-232-7647				FOR RELEASE: November 5, 2008

TRANSOCEAN INC. REPORTS

THIRD QUARTER 2008 FINANCIAL RESULTS

HOUSTON – Transocean Inc. (NYSE: RIG) today reported net income for the three months ended September 30, 2008 of $1.106 billion, or $3.44 per diluted share, compared to net income of $973 million, or $4.63 per diluted share for the three months ended September 30, 2007. Revenues for the third quarter of 2008 were $3.192 billion compared to $1.538 billion for the third quarter of 2007.

For the nine months ended September 30, 2008, net income totaled $3.402 billion, or $10.59 per diluted share, on revenues of $9.404 billion. For the same period in 2007, net income totaled $2.075 billion, or $9.87 per diluted share, on revenues of $4.300 billion. Net income for the nine months ended September 30, 2008 included after-tax charges of $16 million, or $0.05 per diluted share, resulting primarily from a $14 million loss on short-term investments, $10 million of discrete tax items, $3 million of merger-related costs and a $3 million loss from the early retirement of debt. These charges were offset by income of $14 million from the TODCO tax sharing agreement. For the same period last year, net income included after-tax gains of $369 million, or $1.75 per diluted share, from the TODCO tax sharing agreement, rig sales and discrete tax items.

On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation and reclassified its ordinary shares into cash and shares (the “Reclassification”). Reported results for the third quarter and first nine months of 2008 include a full three and nine months, respectively, from GlobalSantaFe’s operations. Diluted earnings per share for the third quarter and first nine months of 2007 exclude GlobalSantaFe’s operations and are based on a weighted average diluted share count of 210 million and 211 million shares, respectively, which includes the effect of restating the historical diluted share count for the Reclassification.

Operations Quarterly Review

Revenues for the three months ended September 30, 2008 were $3.192 billion compared to revenues of $3.102 billion during the three months ended June 30, 2008. The $90 million quarter-to-quarter increase in total revenues included $112 million of higher contract drilling revenues reflecting a decrease in out-of-service time for planned shipyards, an increase in average dayrates and a $25 million increase in other revenues primarily from increases in integrated services and non-drilling activities. A $47 million decline in contract drilling intangible revenues partially offset these increases. The average dayrate for the fleet increased two percent from $238,600 in the second quarter to $242,200 in the third quarter, primarily as a result of rigs commencing new contracts at higher dayrates in the third quarter.

Operating and maintenance expenses for the three months ended September 30, 2008 were $1.426 billion compared to $1.364 billion for the prior three-month period. The $62 million increase in operating and maintenance expenses primarily reflects estimated expenses of $44 million related to dropped riser and an increase in maintenance and non-drilling and integrated services costs compared to the second quarter of 2008, partially offset by reduced shipyard costs.

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Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the third quarter of 2008 decreased to $100 million compared to $111 million for the second quarter of 2008. The decrease resulted primarily from a quarter-to-quarter reduction in total debt of approximately $496 million. As of September 30, 2008, total debt was $14.783 billion compared to $15.279 billion as of June 30, 2008.

Cash flow from operating activities totaled $1.270 billion for the third quarter of 2008 compared to $1.011 billion for the second quarter of 2008. Higher quarter-to-quarter cash flow during the third quarter primarily reflects increases in net income, decreases in deferred expenses and deferred taxes, partially offset by an increase in working capital.

Effective Tax Rate

The Annual Effective Tax Rate⁽¹⁾ for each of the third quarter and first nine months of 2008 was 15.1 percent and 13.3 percent, respectively. The Effective Tax Rate⁽²⁾ for first nine months of 2008 was 13.6 percent, which reflects the impact of various discrete tax items totaling $7 million, primarily related to changes in estimates. The Effective Tax Rate⁽²⁾ for the third quarter of 2008 was 13.7 percent.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern Time on November 5, 2008. To participate, dial 913-981-5568 and refer to confirmation code 7057401 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 the company’s website at www.deepwater.com and selecting “Investor Relations/News & Events/Webcasts & Presentations.” A file containing four charts to be discussed during the conference call, titled “3Q08 Charts,” has been posted to the company’s website and can also be found by selecting “Investor Relations/News & Events/Webcasts & Presentations.” The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company’s New York Stock Exchange trading symbol, “RIG.”

A telephonic replay of the conference call should be available after 1:00 p.m. Eastern Time on November 5, 2008 and can be accessed by dialing 719-457-0820 and referring to the passcode 7057401. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.

Transocean Inc. is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 136 mobile offshore drilling units plus 10 announced ultra-deepwater newbuild units, the company’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. The company owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 29 Midwater Floaters, 10 High-Specification Jackups, 54 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

 

(1)

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.”

(2)	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.”

 

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2008				2007				2008				2007
Operating revenues
Contract drilling revenues		$	2,699			$	1,455			$	7,926			$	4,088
Contract drilling intangible revenues			143				—				557				—
Other revenues			350				83				921				212
			3,192				1,538				9,404				4,300
Costs and expenses
Operating and maintenance			1,426				663				3,947				1,858
Depreciation, depletion and amortization			336				103				1,040				304
General and administrative			46				27				140				82
			1,808				793				5,127				2,244
Gain (loss) from disposal of assets, net			(1	)			8				(4	)			30
Operating income			1,383				753				4,273				2,086
Other income (expense), net
Interest income			7				7				30				17
Interest expense, net of amounts capitalized			(100	)			(23	)			(348	)			(93	)
Other, net			(12	)			287				(23	)			295
			(105	)			271				(341	)			219
Income before income taxes and minority interest			1,278				1,024				3,932				2,305
Income tax expense			175				52				533				230
Minority interest			(3	)			(1	)			(3	)			—
Net income		$	1,106			$	973			$	3,402			$	2,075
Earnings per share
Basic		$	3.47			$	4.80			$	10.69			$	10.25
Diluted		$	3.44			$	4.63			$	10.59			$	9.87
Weighted average shares outstanding
Basic			319				203				318				202
Diluted			321				210				321				211

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

		September 30, 2008				December 31, 2007
		(Unaudited)
ASSETS
Cash and cash equivalents		$	829			$	1,241
Short-term investments			392				—
Accounts receivable, net of allowance for doubtful accounts of $65 and $50 at September 30, 2008 and December 31, 2007, respectively			2,783				2,370
Materials and supplies, net of allowance for obsolescence of $28 and $22 at September 30, 2008 and December 31, 2007, respectively			429				333
Deferred income taxes, net			55				119
Assets held for sale			564				—
Other current assets			236				233
Total current assets			5,288				4,296
Property and equipment			25,152				24,545
Less accumulated depreciation			4,597				3,615
Property and equipment, net			20,555				20,930
Goodwill			8,346				8,219
Other assets			976				919
Total assets		$	35,165			$	34,364
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable		$	934			$	805
Accrued income taxes			234				99
Debt due within one year			932				6,172
Other current liabilities			853				826
Total current liabilities			2,953				7,902
Long-term debt			13,851				11,085
Deferred income taxes, net			755				681
Other long-term liabilities			1,528				2,125
Total long-term liabilities			16,134				13,891
Commitments and contingencies
Minority interest			3				5
Preference shares, $0.10 par value; 50,000,000 shares authorized, none issued and outstanding			—				—
Ordinary shares, $0.01 par value; 800,000,000 shares authorized, 319,068,820 and 317,222,909 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively			3				3
Additional paid-in capital			10,911				10,799
Accumulated other comprehensive loss			(46	)			(42	)
Retained earnings			5,207				1,806
Total shareholders’ equity			16,075				12,566
Total liabilities and shareholders’ equity		$	35,165			$	34,364

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Three months ended September 30,								Nine months ended September 30,
		2008				2007				2008				2007
Cash flows from operating activities
Net income		$	1,106			$	973			$	3,402			$	2,075
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of drilling contract intangibles			(143	)			—				(557	)			—
Depreciation, depletion and amortization			336				103				1,040				304
Share-based compensation expense			16				11				49				30
(Gain) loss from disposal of assets, net			1				(8	)			4				(30	)
Impairment of short-term investments			16				—				16				—
Deferred revenue, net			(3	)			(20	)			22				18
Deferred expenses, net			(3	)			(4	)			(132	)			(17	)
Deferred income taxes			60				9				4				2
Other, net			(6	)			2				3				6
Changes in operating assets and liabilities			(110	)			(169	)			(88	)			(230	)
Net cash provided by operating activities			1,270				897				3,763				2,158
Cash flows from investing activities
Capital expenditures			(514	)			(305	)			(1,703	)			(1,060	)
Proceeds from disposal of assets, net			5				21				352				62
Proceeds from sale of investments			14				—				14				—
Short-term investments			(408	)			—				(408	)			—
Joint ventures and other investments, net			—				—				(3	)			(3	)
Net cash used in investing activities			(903	)			(284	)			(1,748	)			(1,001	)
Cash flows from financing activities
Borrowings (repayments) under commercial paper program, net			(213	)			—				932				—
Borrowings (repayments) under revolving credit facilities, net			415				—				(1,085	)			—
Proceeds from debt			303				—				2,354				—
Repayments of debt			(1,000	)			(470	)			(4,673	)			(700	)
Repurchase of ordinary shares			—				—				—				(400	)
Proceeds from (payments made upon) exercise of warrants, net			—				16				(4	)			16
Proceeds from (taxes paid for) issuance of ordinary shares under share-based compensation plans, net			(12	)			1				49				56
Excess tax benefit from issuance of ordinary shares under share-based compensation plans			—				23				11				33
Other, net			(7	)			(10	)			(11	)			(11	)
Net cash used in financing activities			(514	)			(440	)			(2,427	)			(1,006	)
Net increase (decrease) in cash and cash equivalents			(147	)			173				(412	)			151
Cash and cash equivalents at beginning of period			976				445				1,241				467
Cash and cash equivalents at end of period		$	829			$	618			$	829			$	618

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Transocean Inc.

Fleet Operating Statistics

 

		Operating Revenues ($ Millions) (1)
		Three months ended												Nine months ended September 30,
		September 30, 2008				June 30, 2008				September 30, 2007				2008				2007
Contract Drilling Revenues
High-Specification Floaters:
Ultra Deepwater Floaters		$	617			$	558			$	381			$	1,783			$	1,057
Deepwater Floaters			323				377				280				1,025				778
Harsh Environment Floaters			163				168				122				481				358
Total High-Specification Floaters			1,103				1,103				783				3,289				2,193
Midwater Floaters			690				650				409				2,015				1,177
High-Specification Jackups			144				147				12				448				36
Standard Jackups			749				674				236				2,134				637
Other Rigs			13				13				15				40				45
Subtotal			2,699				2,587				1,455				7,926				4,088
Contract Intangible Revenue			143				190				0				557				0
Other Revenues
Client Reimbursable Revenues			55				51				32				152				91
Integrated Services and Other			12				48				51				8				121
Drilling Management Services			257				208				0				693				0
Oil and Gas Properties			26				18				0				68				0
Subtotal			350				325				83				921				212
Total Company		$	3,192			$	3,102			$	1,538			$	9,404			$	4,300
		Average Dayrates (1)
		Three months ended												Nine months ended September 30,
		September 30, 2008				June 30, 2008				September 30, 2007				2008				2007
High-Specification Floaters:
Ultra Deepwater Floaters		$	401,300			$	390,400			$	323,200			$	390,700			$	304,600
Deepwater Floaters		$	322,700			$	317,400			$	251,600			$	307,600			$	227,400
Harsh Environment Floaters		$	363,500			$	379,400			$	312,300			$	362,400			$	281,100
Total High-Specification Floaters		$	369,300			$	360,500			$	291,900			$	356,600			$	268,600
Midwater Floaters		$	292,900			$	299,300			$	254,000			$	294,800			$	240,100
High-Specification Jackups		$	178,500			$	178,000			$	131,600			$	176,700			$	131,800
Standard Jackups		$	158,700			$	149,400			$	120,000			$	151,400			$	113,800
Other Rigs		$	48,900			$	48,400			$	54,800			$	49,000			$	54,100
Total Drilling Fleet		$	242,200			$	238,600			$	219,700			$	236,500			$	206,800
		Utilization (1)
		Three months ended												Nine months ended September 30,
		September 30, 2008				June 30, 2008				September 30, 2007				2008				2007
High-Specification Floaters:
Ultra Deepwater Floaters			93	%			87	%			99	%			93	%			98	%
Deepwater Floaters			68	%			81	%			76	%			76	%			78	%
Harsh Environment Floaters			98	%			98	%			85	%			97	%			93	%
Total High-Specification Floaters			83	%			86	%			86	%			86	%			88	%
Midwater Floaters			88	%			82	%			92	%			86	%			95	%
High-Specification Jackups			87	%			91	%			100	%			93	%			100	%
Standard Jackups			93	%			89	%			89	%			92	%			85	%
Other Rigs			100	%			100	%			98	%			100	%			99	%
Total Drilling Fleet			89	%			87	%			89	%			89	%			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 Inc. and Subsidiaries

Supplemental Effective Tax Rate Analysis

(In millions)

 

		Three months ended												Nine months ended								Years ended Dec. 31,
		Sept. 30, 2008				June 30, 2008				Sept. 30, 2007				Sept. 30, 2008				Sept. 30, 2007				2007				2006
Income (Loss) before income taxes and minority interest		$	1,278			$	1,246			$	1,024			$	3,932			$	2,305			$	3,384			$	1,607
Add back (subtract):
(Gain) loss on disposal of assets, net			—				—				(9	)			—				(31	)			(264	)			(410	)
Income from TODCO tax sharing agreement			(14	)			—				(276	)			(14	)			(276	)			(277	)			(51	)
Loss on The Reserve Funds			16				—				—				16				—				—				—
(Gain) loss on retirement of debt			—				1				—				3				—				8				—
GSF Merger related costs			1				3				—				5				—				82				—
Adjusted income before income taxes			1,281				1,250				739				3,942				1,998				2,933				1,146
Income tax expense			175				140				52				533				230				253				222
Add back (subtract):
(Gain) loss on disposal of assets, net			—				—				—				—				(3	)			(3	)			(24	)
Loss on The Reserve Funds			2				—				—				2				—				—				—
GSF Merger related costs			1				—				—				1				—				15				—
Changes in estimates (1)			15				2				52				(10	)			65				101				14
Adjusted income tax expense (2)		$	193			$	142			$	104			$	526			$	292			$	366			$	212
Effective Tax Rate (3)			13.7	%			11.2	%			5.1	%			13.6	%			10.0	%			7.5	%			13.8	%
Annual Effective Tax Rate (4)			15.1	%			11.4	%			14.0	%			13.3	%			14.6	%			12.5	%			18.5	%

 

(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 Sept. 30, 2008 include $21 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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Transocean Inc. and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Operating Income Before General and Administrative Expense

to Field Operating Income

(in US$ millions)

 

		Three months ended										Nine months ended
		September 30, 2008			June 30, 2008			September 30, 2007				September 30, 2008			September 30, 2007
Operating revenue		$	3,192		$	3,102		$	1,538			$	9,404		$	4,300
Operating and maintenance expense			1,426			1,364			663				3,947			1,858
Depreciation, depletion and amortization			336			337			103				1,040			304
(Gain) loss from disposal of assets, net			1			6			(8	)			4			(30	)
Operating income before general and administrative expense			1,429			1,395			780				4,413			2,168
Add back (subtract):
Depreciation, depletion and amortization			336			337			103				1,040			304
(Gain) loss from disposal of assets, net			1			6			(8	)			4			(30	)
Field operating income		$	1,766		$	1,738		$	875			$	5,457		$	2,442

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