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Shares of Transocean Ltd. RIG have rallied 16.5% since first-quarter 2021 earnings announcement on May 3.
Despite the company’s unpleasant bottom-line performance, investors were pleased by its ability to minimize its debt-to-capitalization to 38.5% in the first quarter, down from 40% in the previous quarter. The uptick was also driven by an upbeat second-quarter contract drilling revenue guidance, which indicates growth from the sequential quarter’s reported figure.
Behind the Earnings Headlines
Transocean reported an adjusted net loss of 19 cents per share for first-quarter 2021, wider than the Zacks Consensus Estimate of a loss of 16 cents. This underperformance reflects lower utilization.
However, Transocean’s bottom line narrowed from the year-ago adjusted loss of 30 cents on impressive revenue efficiency and higher dayrates.
The offshore drilling powerhouse’s total revenues of $653 million surpassed the Zacks Consensus Estimate of $639 million. However, the top line fell 14% from the year-earlier figure of $759 million.
Segmental Revenue Break-Up
Transocean’s Ultra-deepwater floaters contributed to 66.8% of total contract drilling revenues while Harsh Environment floaters accounted for the remainder. In first-quarter 2021, revenues from Ultra-deepwater and Harsh Environment floaters totaled $436 million and $217 million, respectively, compared with the corresponding year-ago reported figures of $528 million and $220 million.
Revenue efficiency was 97.4%, higher than 97.2% reported sequentially and the year-ago value of 94.4%.
Dayrates and Utilization
Average dayrates in the quarter rose to $373,700 from the year-ago level of $314,900. The company witnessed strong year-over-year average revenues per day from Harsh Environment floaters. Overall, fleet utilization was 53% in the quarter, down from the prior-year utilization rate of 60%.
Transocean’s backlog record at $7.4 billion as of April reflects a decline of $2.2 billion from the year-ago figure.
Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. price-consensus-eps-surprise-chart | Transocean Ltd. Quote
Costs, Capex & Balance Sheet
Operating and maintenance costs decreased to $435 million from $540 million a year ago. The company spent $59 million on capital investment in the first quarter. Cash provided by operating activities totaled $96 million. The company had cash and cash equivalents worth $1.06 billion as of Mar 31, 2021. Long-term debt was $7.1 billion with debt-to-capitalization of 38.5% as of the same date, declining from the sequential quarter’s 40%.
For the second quarter of 2021, this offshore drilling contractor expects adjusted contract drilling revenues of $675 million, indicating sequential growth from the reported figure of $653 million. Meanwhile, it expects second-quarter operations and maintenance expenses of $445 million. Notably, its G&A expenses are expected to be $40 million while capital expenditure including capitalized interest is estimated to be $60 million.
Zacks Rank & Stocks to Consider
Transocean currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Whiting Petroleum Corporation WLL, Matador Resources Company MTDR and Continental Resources, Inc. CLR, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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