Transocean Ltd. Reports First Quarter 2009 Financial Results
Transocean Ltd. Reports First Quarter 2009 Financial Results
5/6/2009 7:31:00 AM
ZUG, Switzerland--(BUSINESS WIRE)--May. 6, 2009-- Transocean Ltd. (NYSE:RIG) today reported net income attributable to controlling interest for the three months ended March 31, 2009 of $942 million, or $2.93 per diluted share, compared to net income attributable to controlling interest of $1.149 billion, or $3.58 per diluted share for the three months ended March 31, 2008. Revenues for the first quarter of 2009 were $3.118 billion compared to $3.110 billion for the first quarter of 2008.
First quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $264 million, or $0.82 per diluted share, as follows:
$221 million of write-downs to fair market value for the GSF Arctic II and GSF Arctic IV semisubmersible rigs held for sale and $43 million of discrete tax items, payments associated with the merger of Transocean and GlobalSantaFe Corporation and losses on the retirement of debt. First quarter 2008 reported income included certain net charges, after-tax, totaling $30 million, or $0.09 per diluted share, consisting of $27 million in discrete tax items, $1 million in merger-related costs and a $2 million loss related to the retirement of debt.
Operations Quarterly Review
Revenues for the three months ended March 31, 2009 decreased 4.6 percent to $3.118 billion compared to revenues of $3.270 billion during the three months ended December 31, 2008. Of the $152 million quarter-to-quarter decrease, $127 million reflected a decline in integrated services and other revenue and $29 million resulted from reduced contract drilling intangible revenues.
Operating and maintenance expenses for the three months ended March 31, 2009 were $1.171 billion compared to $1.408 billion for the prior three-month period, a decrease of $237 million or 16.8 percent. The quarter-to-quarter decline in operating and maintenance costs consisted of $92 million from reduced non-drilling activity, $77 million related to a reduction in shipyard and maintenance projects and the remainder related to reductions in a variety of items including bad debt expense, strengthening of the U.S. dollar and decreases in drilling activity.
Depreciation, depletion and amortization totaled $355 million in the first quarter of 2009, a decrease of 10.4 percent compared to $396 million in the fourth quarter of 2008. The $41 million quarter-to-quarter decrease resulted primarily from the cumulative effect of various adjustments related to the merger with GlobalSantaFe made during fourth quarter 2008 that did not recur in the first quarter 2009.
General and administrative expenses decreased 5.1 percent to $56 million for the first quarter of 2009 compared to $59 million for the fourth quarter 2008. The decrease primarily reflects a reduction in costs related to the company’s move to Switzerland incurred in the first quarter of 2009 compared to the fourth quarter 2008.
Interest expense, net of amounts capitalized, for the first quarter of 2009 totaled $136 million compared to $167 million for the fourth quarter of 2008. The decrease in interest expense included $16 million from increased capitalized interest and $11 million from lower interest rates and lower balances in our commercial paper program.
During the first quarter 2009, Transocean adopted Financial Accounting Standards Board Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”), which requires the company to separately account for the liability and equity components of its convertible debt instruments and to reflect interest expense at its market rate of borrowing. For the first quarter 2009, interest expense, net of amounts capitalized, included a non-cash increase of approximately $45 million resulting from the adoption of FSP APB 14-1. For the full year 2009, interest expense, net of amounts capitalized, is expected to include a non-cash increase of $176 million resulting from the adoption of FSP APB 14-1.
First quarter 2008 results are presented as adjusted for the retrospective application of FSP APB 14-1. For the first quarter 2008, interest expense, net of amounts capitalized, included a non-cash increase of $40 million resulting from the retrospective application of FSP APB 14-1. For the full year 2008, retrospective application of FSP APB 14-1 will result in a non-cash increase to interest expense, net of amounts capitalized, of $171 million. Additionally, the retrospective application of FSP APB 14-1 to our balance sheet as of March 31, 2008 caused our total assets to decrease by $5 million, our liabilities to decrease by $776 million and our equity to increase by $771 million.
As of March 31, 2009, total debt was $12.964 billion, compared to total debt of $13.557 billion as of December 31, 2008 (as adjusted for FSP APB 14-1). The decrease in total debt of $593 million during the first quarter 2009 resulted primarily from debt repayments, partially offset by additional borrowings under our joint venture credit facilities and increased amortization of discounts and fair value adjustments. The retrospective application of FSP APB 14-1 to our balance sheet as of December 31, 2008 caused our total assets to increase by $11 million, our liabilities to decrease by $629 million and our equity to increase by $640 million.
Cash flow from operating activities totaled $1.441 billion for the first quarter of 2009 compared to $1.196 billion for the fourth quarter of 2008.
Effective Tax Rate
Transocean’s reported Effective Tax Rate(1) of 21.1 percent for the first quarter of 2009 reflects the unfavorable impact of the write-down of rigs to fair market value, as described above, as well as various discrete tax items of $36 million which primarily resulted from changes in estimates. Excluding these various discrete items, the Annual Effective Tax Rate(2) for the first quarter of 2009 was 15.2 percent.