Transocean Ltd. Reports Fourth Quarter And Full Year 2015 Results

OREANDA-NEWS. February 26, 2016. Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported net income attributable to controlling interest of \\$611 million, \\$1.66 per diluted share, for the three months ended December 31, 2015. Fourth quarter 2015 results included net unfavorable items of \\$4 million, \\$0.02 per diluted share, as follows:

• \\$29 million, \\$0.08 per diluted share, related to loss on impairment of the GSF Grand Banks and Deepwater Navigator, which the company has classified as held for sale;
• \\$22 million, \\$0.06 per diluted share, related to restructuring costs; and
• \\$1 million in discontinued operations.
   

These net unfavorable items were partially offset by:

• \\$27 million, \\$0.07 per diluted share, in favorable discrete tax benefits; and
• \\$21 million, \\$0.05 per diluted share, in net gains on early debt retirements and asset disposals.
   

After consideration of these net unfavorable items, fourth quarter 2015 adjusted net income was \\$615 million, or \\$1.68 per diluted share.
 
For the three months ended December 31, 2014, the company reported a net loss attributable to controlling interest of \\$739 million, or \\$2.04 per diluted share. Fourth quarter 2014 included net unfavorable items of \\$1.08 billion, \\$2.99 per diluted share, mainly associated with the impairment of goodwill. Excluding the net unfavorable items, adjusted net income was \\$344 million, or \\$0.95 per diluted share.

Total revenues for the three months ended December 31, 2015, increased \\$243 million sequentially to \\$1.85 billion. Other revenues increased \\$356 million due to early contract terminations on the Polar Pioneer, Discoverer Americas, and Sedco 714. Contract drilling revenues decreased \\$113 million due to reduced activity and rig retirements partially offset by higher ultra-deepwater revenue efficiency and higher demobilization revenues.

Operating and maintenance expense decreased \\$86 million sequentially to \\$794 million.  The decrease was due primarily to lower activity and the impact of the company's actions to reduce onshore and offshore costs.

General and administrative expense was \\$58 million, compared with \\$45 million in the prior quarter. The increase was due largely to restructuring costs.

Depreciation expense was \\$213 million, compared with \\$210 million in the prior period.

The Effective Tax Rate⁽⁴⁾ was 9.7 percent, up from 4.9 percent in the third quarter of 2015. The Annual Effective Tax Rate was 13.1 percent, up from 7.5 percent in the previous quarter. The increase was due largely to changes in adjusted pre-tax income, currency exchange rates, and the impact of jurisdictional and operational structure changes for certain rigs implemented in the third quarter of 2015.

Interest expense, net of amounts capitalized, decreased \\$22 million sequentially to \\$87 million, reflecting, in part, the company's early debt retirements. Capitalized interest was \\$49 million, compared with \\$36 million in the third quarter of 2015. Interest income was \\$5 million, unchanged from the prior quarter.

Cash flows from operating activities increased \\$312 million sequentially to \\$960 million due primarily to early contract terminations.

Capital expenditures totaled \\$665 million, down from \\$940 million in the prior quarter. The decrease was associated with the company's newbuild program. During the quarter, the company took delivery of the newbuild ultra-deepwater drillship Deepwater Proteus, and the floater is expected to be placed into service in the second quarter of 2016.

"I would like to thank the Transocean team for delivering very solid operating and financial results throughout an extremely challenging year for our industry," said President and Chief Executive Officer Jeremy Thigpen. "While predicting the timing of an industry recovery is nearly impossible, we take comfort in knowing that our strong liquidity, combined with our market-leading backlog, will sustain us through this downturn. Until that time, we will continue to take the necessary steps to keep our employees safe, to drive performance improvements for our customers, to further streamline our business, and to enhance our financial position and returns."

Full Year 2015

For the year ended December 31, 2015, net income attributable to controlling interest totaled \\$791 million, or \\$2.16 per diluted share. Full year results included \\$946 million, \\$2.58 per diluted share, of net unfavorable items as follows:

• \\$1.71 billion, \\$4.67 per diluted share, associated with the impairment of the Deepwater and Midwater Floater asset groups, and held for sale or scrapped rigs; and
• \\$40 million, \\$0.11 per diluted share, related to restructuring costs.
   

These net unfavorable items were partially offset by:

• \\$735 million, \\$2.02 per diluted share, associated with favorable settlement agreements and insurance recoveries related to Macondo; and
• \\$72 million, \\$0.18 per diluted share, in net gains on early debt retirements and asset disposals, discrete tax benefits, and discontinued operations. 

After excluding the net unfavorable items, adjusted net income for 2015 was \\$1.74 billion, or \\$4.74 per diluted share.

For the year ended December 31, 2014, net loss attributable to controlling interest totaled \\$1.91 billion, \\$5.29 per diluted share, which included net unfavorable items of \\$3.71 billion, \\$10.23 per diluted share primarily associated with the impairment of goodwill. After consideration of the net unfavorable items, adjusted net income for 2014 was \\$1.80 billion, or \\$4.94 per diluted share.

Non-GAAP Financial Measures

All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at: www.deepwater.com.

About Transocean

Transocean is a leading international provider of offshore contract drilling services for oil and gas wells. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world.

Transocean owns or has partial ownership interests in, and operates a fleet of 61 mobile offshore drilling units consisting of 28 ultra-deepwater floaters, seven harsh-environment semisubmersibles, five deepwater semisubmersibles, 11 midwater semisubmersibles and 10 high-specification jackups. In addition, the company has six ultra-deepwater drillships and five high-specification jackups under construction or under contract to be constructed.

For more information about Transocean, please visit: www.deepwater.com.

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EST, 3 p.m. CET, on Thursday, February 25, 2016, to discuss the results. To participate, dial +1 719-325-2366 and refer to confirmation code 167123 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode over the Internet and can be accessed on Transocean's website, www.deepwater.com, by selecting "Investor Relations/Overview." Supplemental materials that may be referenced during the teleconference will be posted to Transocean's website and can be found by selecting "Investor Relations/Financial Reports."

A replay of the conference call will be available after 12 p.m. EST, 6 p.m. CET, on February 25, 2016. The replay, which will be archived for approximately 30 days, can be accessed by dialing +1 719-457-0820 and referring to the confirmation code 167123. The replay will also be available on the company's website.

Forward-Looking Statements

The statements described in this press release 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. These statements contain words such as "possible," "intend," "will," "if," "expect" or other similar expressions. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in tax estimates, impairment of goodwill, asset impairments, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, fleet utilization, the future prices of oil and gas, capital markets and other factors, including those and other risks discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2014, and in the company's other filings with the 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 the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not 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 to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law.

This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus within the meaning of the listing rules of the SIX Swiss Exchange. Investors must rely on their own evaluation of Transocean and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean.

Notes
 
(1) Annual Effective Tax Rate is defined as income tax expense from continuing operations excluding various discrete items (such as changes in estimates and tax on items excluded from income before income tax expense), divided by income from continuing operations before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

(2) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. See the accompanying schedule entitled "Revenue Efficiency."

(3) Rig utilization is defined as the total number of operating days divided by the total number of rig calendar days in the measurement period, expressed as a percentage. See the accompanying schedule entitled "Utilization."

(4) Effective Tax Rate is defined as income tax expense for continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

Analyst Contacts:
Bradley Alexander
+1 713-232-7515

Diane Vento
+1 713-232-8015

Media Contact:
Pam Easton
+1 713-232-7647

TRANSOCEAN LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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CONSOLIDATED BALANCE SHEETS
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FLEET OPERATING STATISTICS

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FLEET OPERATING STATISTICS (continued)

3. Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions.