OREANDA-NEWS. Transocean Partners LLC (NYSE: RIGP) today reported net income attributable to controlling interest for the three months ended December 31, 2015 of $34 million, or $0.49 per unit. For the three months ended December 31, 2014, net income attributable to controlling interest was $19 million, or $0.28 per unit.

Distributable cash flow attributable to controlling interest was $38 million, compared with $16 million in the prior quarter. A quarterly distribution of $0.3625 per unit, or approximately $25 million based upon the number of currently outstanding units, has been declared for the three months ended December 31, 2015.

Revenues for the three months ended December 31, 2015, increased $29 million sequentially to $154 million due primarily to higher revenue efficiency on the Discoverer Inspiration.

Operating and maintenance expenses decreased $19 million sequentially to $54 million due primarily to lower maintenance costs associated with the Discoverer Inspiration and Discoverer Clear Leader.

General and administrative expenses were $7 million, compared with $6 million in the prior quarter.

The company's Effective Tax Rate (4) increased to 6.6 percent, from (0.3) percent in the third quarter of 2015, due primarily to higher adjusted pre-tax income. The third quarter of 2015 included a loss on the impairment of goodwill. The fourth quarter Annual Effective Tax Rate was 6.6 percent, compared with 5.5 percent in the previous quarter.

"The company generated strong cash flows in the fourth quarter and in our first full year of operations," said President, Chief Executive Officer and Chief Financial Officer Kathleen McAllister. "We expect this world-class fleet will continue to perform at similar levels going forward."

Full Year 2015

The company reported a net loss attributable to controlling interest for the year ended December 31, 2015 of $71 million, or $1.02 per unit. Full year 2015 results included a goodwill impairment loss of $356 million ($182 million attributable to controlling interest), which was due primarily to a decline in the market outlook. Excluding the impairment, adjusted net income was $111 million, or $1.60 per unit. For the period from August 5, 2014, the date of the company's initial public offering, through December 31, 2014, the company's net income attributable to controlling interest was $36 million, or $0.52 per unit.

Distributable cash flow attributable to controlling interest for the year ended December 31, 2015 was $125 million, compared with $51 million for the period from August 5, 2014 through December 31, 2014.

Non-GAAP Financial Measures

Distributable cash flow and adjusted net income are non-GAAP financial measures; reconciliations of the non-GAAP measures to the most directly comparable GAAP measures are provided in the accompanying schedules and are displayed in quantitative schedules on the company's website at: www.transoceanpartners.com.

About Transocean Partners

Transocean Partners is a growth-oriented limited liability company formed by Transocean Ltd. to own, operate and acquire modern, technologically advanced offshore drilling rigs. Headquartered in London, Transocean Partners' assets consist of 51 percent interests in subsidiary companies that own and operate three ultra-deepwater drilling rigs.

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, unit repurchases and the timing of the repurchases, the distribution and timing of distribution payments, the securities markets generally, the impact of adverse market conditions affecting the business of Transocean Partners, utilization, downtime and other aspects of Transocean Partners' drilling rigs, adverse changes in laws including with respect to tax and regulatory matters, 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, the prices of oil and gas, capital markets and other factors, including those and other factors discussed in  Transocean Partners' Annual Report on Form 10-K for the year ended December 31, 2014 and in Transocean Partners' 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. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, Transocean Partners undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur, or which Transocean Partners becomes aware of, after the date hereof, except as otherwise may be required by law.

Conference Call Information

Transocean Partners will conduct a teleconference starting at 10:30 a.m. EST, 3:30 p.m. GMT, on Thursday, February 25, 2016, to discuss the period's results. To participate, dial +1 719-457-2646 and refer to confirmation code 327677 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 Partners' website, www.transoceanpartners.com, by selecting "Investor Relations." Supplemental materials that may be referenced during the teleconference will be posted to the website and can be found by selecting "Investor Relations/Financial Reports."

A replay of the conference call will be available after 1:30 p.m. EST, 6:30 p.m. GMT, 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 327677. The replay will also be available on the company's website.

Notes

(1) 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."

(2) 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.

(3) 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. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

(4) 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."

 

TRANSOCEAN PARTNERS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit data)
(unaudited)

    Three months ended
December 31,		       Years ended
December 31,		  
    2015     2014       2015     2014  
                           
Operating revenues                                  
Contract drilling revenues   $ 150     $ 135       $ 564     $ 557  
Other revenues     4       3         16       10  
      154       138         580       567  
Costs and expenses                                  
Operating and maintenance     54       62         245       248  
Depreciation     17       17         68       66  
General and administrative     7       10         24       20  
      78       89         337       334  
Loss on impairment     -       -         (356 )     -  
Loss on disposal of assets, net     -       -         (1 )     -  
Operating income (loss)     76       49         (114 )     233  
                                   
Other income (expense), net                                  
Interest income     -       1         2       3  
Interest expense     -       (1 )       (1 )     (1 )
      -       -         1       2  
Income (loss) before income tax expense     76       49         (113 )     235  
Income tax expense     5       4         14       20  
                                   
Net income (loss)     71       45         (127 )   $ 215  
Net income attributable to Predecessor     -       -         -       135  
Net income (loss)subsequent to initial public offering     71       45         (127 )     80  
Net income (loss) attributable to noncontrolling interest     37       26         (56 )     44  
Net income (loss) attributable to controlling interest   $ 34       19       $ (71 )     36  
                                   
Earnings (loss) per unit - basic                                  
Earnings per common unit   $ 0.49     $ 0.28       $ (1.02 )   $ 0.52  
Earnings per subordinated unit   $ 0.49     $ 0.28       $ (1.02 )   $ 0.52  
                                   
Earnings (loss) per unit - diluted                                  
Earnings per common unit   $ 0.49     $ 0.28       $ (1.02 )   $ 0.52  
Earnings per subordinated unit   $ 0.49     $ 0.28       $ (1.02 )   $ 0.52  
                                   
Weighted-average units outstanding-basic                                  
Common units     41       41         41       41  
Subordinated units     28       28         28       28  
                                   
Weighted-average units outstanding-diluted                                  
Common units     41       41         41       41  
Subordinated units     28       28         28       28  

TRANSOCEAN PARTNERS LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except unit data)
(unaudited)

                 
      December 31,  
      2015   2014  
                 
Assets                
Cash and cash equivalents     $  159    $  86   
Accounts receivable        115       112   
Accounts receivable from affiliates        1       28   
Materials and supplies, net        34       41   
Prepaid assets        7       6   
Total current assets        316       273   
                 
Property and equipment        2,296       2,302   
Less accumulated depreciation        (401)      (336)  
Property and equipment, net        1,895       1,966   
Goodwill        -      356   
Deferred income taxes, net        10       15   
Other assets        10       22   
Total assets     $  2,231    $  2,632   
                 
Liabilities and equity                
Accounts payable to affiliates     $  51    $  76   
Debt due to affiliates within one year        -      43   
Deferred revenues        15       18   
Other current liabilities        2       1   
Total current liabilities        68       138   
                 
Long-term tax liability        3       1   
Deferred revenues        -      13   
Drilling contract intangible liability        14       29   
Other long-term liabilities        1       -  
Total long-term liabilities        18       43   
                 
Commitments and contingencies                
                 
Common units, 41,287,810 and 41,379,310 issued and outstanding at December 31, 2015 and 2014, respectively        757       847   
Subordinated units, 27,586,207 issued and outstanding at December 31, 2015 and 2014        505       564   
Total members' equity        1,262       1,411   
                 
Noncontrolling interest        883       1,040   
Total equity        2,145       2,451   
Total liabilities and equity     $  2,231    $  2,632   

TRANSOCEAN PARTNERS LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(unaudited)

                     
    Years ended December 31,  
    2015   2014   2013  
             
Cash flows from operating activities                    
Net income (loss)   $  (127)   $  215    $  189   
Adjustments to reconcile to net cash provided by operating activities                    
Amortization of drilling contract intangible      (15)      (15)      (18)  
Depreciation      68       66       66   
Patent royalties expense      23       7      -  
Loss on impairment      356      -     -  
Deferred income taxes      5       18       15   
Other, net      2      -      1   
Changes in deferred revenues, net      (16)      (36)      (29)  
Changes in deferred costs, net      2       (4)      4   
Changes in operating assets and liabilities                    
Decrease in accounts receivable, net      9       4       22   
(Increase) decrease in other current assets, net      5       (8)      (13)  
Increase in current liabilities      1      -     -  
Increase (decrease) in balances due to affiliates, net      (2)      (60)     -  
Increase in income tax liability, net      1       3       2   
Net cash provided by operating activities      312       190       239   
                     
Cash flows from investing activities                    
Payments to affiliates for capital expenditures      (16)      (3)      (4)  
Proceeds from affiliates for disposal of assets, net      12      -     -  
Net cash used in investing activities      (4)      (3)      (4)  
                     
Cash flows from financing activities                    
Proceeds from working capital note payable to affiliate     -      43      -  
Repayment of working capital note payable to affiliate      (43)     -     -  
Contributions resulting from formation transactions     -      8      -  
Contributions for parent indemnification of lost revenues      10       9      -  
Distributions of available cash to unitholders      (100)      (15)     -  
Distributions to holder of noncontrolling interests      (101)     -     -  
Distributions to the Predecessor parent, net     -      (141)      (235)  
Distributions to affiliate for working capital adjustment     -      (5)     -  
Payments to repurchase common units      (1)     -     -  
Net cash used in financing activities      (235)      (101)      (235)  
                     
Net increase in cash and cash equivalents      73       86      -  
Cash and cash equivalents at beginning of period      86      -     -  
Cash and cash equivalents at end of period   $  159    $  86    $ -  

TRANSOCEAN PARTNERS LLC AND SUBSIDIARIES

Revenue Efficiency (1)

           
  4Q 2015 3Q 2015 4Q 2014 FY 2015 FY 2014
Discoverer Clear Leader 103.1% 97.3% 93.9% 98.7% 88.8%
Discoverer Inspiration 92.4% 41.6% 98.7% 82.5% 97.4%
Development Driller III 96.9% 100.1% 95.3% 101.1% 98.3%
Total fleet 97.5% 78.1% 96.1% 93.8% 94.6%
           
(1) 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.
 

 

 

Transocean Partners LLC and Subsidiaries    
Supplemental Effective Tax Rate Analysis    
(In US$ millions, except tax rates)    
     
                 
                 
  Three months ended     Years ended  
  December 31,     September 30,     December 31,     December 31,     December 31,  
  2015     2015     2014     2015     2014  
Income (loss) before income taxes $ 76     $ (260)     $ 49     $ (113)     $ 235  
  Add back (subtract):                                      
  Loss on impairment of goodwill   -       289       -       356       -  
Adjusted income before income taxes $ 76     $ 29     $ 49     $ 243     $ 235  
Income tax (benefit) expense   5       1       4       14       20  

 
  Add back (subtract):                                      
  Changes in estimates (1)   -       1       -       1       -  
Adjusted income tax expense $ 5     $ 2     $ 4     $ 15     $ 20  
                                       
Effective Tax Rate (2)   6.6 %     -0.3 %     8.2 %     -12.4 %     8.5 %
                                       
Annual Effective Tax Rate (3)   6.6 %     5.5 %     8.2 %     6.2 %     8.5 %
                                       
(1) Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation of allowances on deferred taxes and (c) other tax liabilities.  
(2) Effective Tax Rate is income tax expense, divided by income before income taxes.  
(3) 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 tax expense, excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate.  

Transocean Partners LLC and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Distributable Cash Flow

(in US$ millions, except coverage ratio)

          Year Year
  Three months ended ended ended
  12/31/15 09/30/15 06/30/15 03/31/15 12/31/15 12/31/14
Net income (loss) $71 $(261) $73 $(10) $(127) $215
Plus:            
Income tax expense 5 1 4 4 14 20
Interest income - - (1) (1) (2) (2)
Interest expense - - 1 - 1 -
Depreciation expense 17 17 17 17 68 66
             
EBITDA 93 (243) 94 10 (46) 299
Plus:            
Recognition of prior certification costs and license fees 1 1 - 1 3 2
Recognition of non-cash royalty fees 6 5 7 5 23 7
Loss on impairment of goodwill - 289 - 67 356 -
Less:            
Recognition of drilling contract intangible 4 4 3 4 15 15
Recognition of pre-operating revenues 4 4 4 7 19 36
             
Adjusted EBITDA 92 44 94 72 302 257
Plus:            
Planned out-of-service operating and maintenance expense 1 4 3 2 10 6
Claims for indemnification of lost revenues - - - - - 19
Cash proceeds from pre-operating revenues            
associated with long-term receivables 4 4 3 6 17 26
Less:            
Estimated maintenance and replacement capital expenditures 16 17 17 16 66 69
Cash interest income, net - - (1) (1) (2) (2)
Cash income taxes 2 2 4 1 9 2
             
Distributable Cash Flow 79 33 80 64 256 239
Distributable cash flow attributable to the Predecessor - - - - - 131
Distributable cash flow attributable to noncontrolling interest 41 17 41 32 131 57
Distributable cash flow attributable to controlling interest $38 $16 $39 $32 $125 $51
             
Aggregate declared distribution to unitholders $25 $25 $25 $25 $100 $40
             
Distribution coverage ratio 1.51x 0.64x 1.56x 1.27x 1.25x 1.28x

Transocean Partners LLC and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Distributable Cash Flow

(in US$ millions, except coverage ratio)

          Year Year
  Three months ended ended ended
  12/31/15 09/30/15 06/30/15 03/31/15 12/31/15 12/31/14
Net cash flow provided by operating activities $68 $67 $56 $121 $312 $190
Plus:            
Changes in operating assets and liabilities 21 (22) 38 (51) (14) 61
Changes in deferred revenues, net 5 4 2 5 16 36
Changes in deferred costs, net (1) (1) (2) 2 (2) 4
Interest income, net of interest expense - - - (1) (1) (2)
Income tax expense, current - 3 3 3 9 2
Recognition of drilling contract intangible 4 4 3 4 15 15
Recognition of non-cash royalty fees (6) (5) (7) (5) (23) (7)
Loss on impairment of goodwill - (289) - (67) (356) -
Other 2 (4) 1 (1) (2) -
             
EBITDA 93 (243) 94 10 (46) 299
Plus:            
Recognition of prior certification costs and license fees 1 1 - 1 3 2
Recognition of non-cash royalty fees 6 5 7 5 23 7
Loss on impairment of goodwill - 289 - 67 356 -
Less:            
Recognition of drilling contract intangible 4 4 3 4 15 15
Recognition of pre-operating revenues 4 4 4 7 19 36
             
Adjusted EBITDA 92 44 94 72 302 257
Plus:            
Planned out-of-service operating and maintenance expense 1 4 3 2 10 6
Claims for indemnification of lost revenues - - - - - 19
Cash proceeds from pre-operating revenues            
associated with long-term receivables 4 4 3 6 17 26
Less:            
Estimated maintenance and replacement capital expenditures 16 17 17 16 66 69
Cash interest income, net - - (1) (1) (2) (2)
Cash income taxes 2 2 4 1 9 2
             
Distributable Cash Flow 79 33 80 64 256 239
Distributable cash flow attributable to the Predecessor - - - - - 131
Distributable cash flow attributable to noncontrolling interest 41 17 41 32 131 57
Distributable cash flow attributable to controlling interest $38 $16 $39 $32 $125 $51
             
Aggregate declared distribution to unitholders $25 $25 $25 $25 $100 $40
             
Distribution coverage ratio 1.51x 0.64x 1.56x 1.27x 1.25x 1.28x

Transocean Partners LLC and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Adjusted Net Income and Adjusted Diluted Earnings Per Unit

(in US$ millions, except per unit data)

  YTD QTD YTD QTD YTD QTD QTD
  12/31/15 12/31/15 09/30/15 09/30/15 06/30/15 06/30/15 03/31/15
Adjusted Net Income              
Net income (loss) attributable to controlling interest, as reported $(71) $34 $(105) $(134) $29 $35 $(6)
Add back (subtract):              
Loss on impairment of goodwill attributable to controlling interest 182 - 182 148 34 - 34
Net income, as adjusted $111 $34 $77 $14 $63 $35 $28
               
Adjusted Diluted Earnings Per Unit:              
Diluted earnings (loss) per unit, as reported $(1.02) $0.49 $(1.52) $(1.94) $0.43 $0.51 $(0.09)
Add back (subtract):              
Loss on impairment of goodwill attributable to controlling interest 2.62 - 2.63 2.13 0.49 - 0.50
Diluted earnings per unit, as adjusted $1.60 $0.49 $1.11 $0.19 $0.92 $0.51 $0.41
               
  YTD QTD YTD QTD YTD QTD QTD
  12/31/14 12/31/14 09/30/14 09/30/14 06/30/14 06/30/14 03/31/14
Adjusted Net Income         (a) (a) (a)
Net income attributable to controlling interest, as reported $36 $19 $17 $17 $- $- $-
Net income, as adjusted $36 $19 $17 $17 $- $- $-
               
Adjusted Diluted Earnings Per Unit:              
Diluted earnings per unit, as reported $0.52 $0.28 $0.24 $0.24 $- $- $-
Diluted earnings per unit, as adjusted $0.52 $0.28 $0.24 $0.24 $- $- $-

(a) We have not presented adjusted net income attributable to controlling interest since the Predecessor did not have controlling and noncontrolling interest.  Additionally, the Predecessor did not have unitholders and did not calculate earnings per unit.  See "Item 1. Financial Statements-Notes to Consolidated Financial Statements-Note 2-Significant Accounting Policies-Presentation," in our annual report on Form 10-K for the year ended December 31, 2015.