Transocean (RIG) Posts Better-than-Expected Q2 Earnings

Offshore drilling giant Transocean Ltd. (NYSE:RIG) reported better-than-expected second-quarter 2016 results owing to contribution from its newbuild, ultra-deepwater drillships Deepwater Proteus and Deepwater Thalassa. The outperformance was offset partially by a lower fleet utilization rate and significant increase in operating and maintenance expenses.

Earnings per share (excluding special items) came in 17 cents against the Zacks Consensus Estimate of a loss of 1 cent. However, the bottom line decreased from the year-ago adjusted earnings of $1.11 per share.

Quarterly total revenue of $943 million beat the Zacks Consensus Estimate of $914.4 million. The top line, however, decreased from the year-ago quarter figure of $1,884 million.

Transocean's high-spec floaters contributed about 75% to the total revenue, while mid-water floaters and high-spec jackup rigs accounted for approximately 14.1% and 7.8%, respectively. The remaining was generated from rig activities, integrated services and others.

Operating Statistics

Transocean’s operating income came in at $154 million, down from $506 million profit in second-quarter 2015. The underperformance was negated partially by the contribution from the company’s newbuild, ultra-deepwater drillships Deepwater Proteus and Deepwater Thalassa. Resumption of activities by harsh-environment floater Henry Goodrich also added to the positives.

Most importantly, total operating and maintenance expenses increased 153.8% year over year to $500 million.

Dayrates and Utilization

Total average dayrates decreased to $353,700 in the quarter under review from $399,700 in the year-earlier quarter. Significantly lower dayrates from all the floaters led to the decline.

Overall fleet utilization was 47%, down from the year-ago utilization rate of 75%.

Capital Expenditure & Balance Sheet

Capital expenditures during the quarter totaled $458 million. As of Jun 30, 2016, Transocean had cash and cash equivalents of $2,153 million and long-term debt of $7,155 million (representing a debt-to-capitalization ratio of approximately 35.2%).

Other News

On Aug 1, 2016, Transocean declared its intent to purchase all the outstanding common units of Transocean Partners LLC (NYSE:RIGP) that are now not owned by the company. For the purchase, Transocean will pay 1.1427 of its shares for each common unit of the partnership.

Zacks Rank

Switzerland-based Transocean currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include Enbridge Inc. (NYSE:ENB) and North Atlantic Drilling Limited (NYSE:NADL) . Both players sport a Zacks Rank #1 (Strong Buy).