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The share price of Transocean Ltd. RIG has gone down 8.1% since the first-quarter 2022 earnings announcement on May 2.
This stock downtrend could primarily be attributed to Transocean posting a first-quarter loss wider than the consensus mark.
Behind the Earnings Headlines
Transocean reported an adjusted net loss of 28 cents per share for the first quarter of 2022, wider than the Zacks Consensus Estimate of a loss of 22 cents. This underperformance reflects a fall in revenues from the year-ago quarter and lower-than-expected utilization, which, at 53%, missed the consensus mark of 54%.
Moreover, RIG’s bottom line worsened from the year-ago period’s loss of 19 cents.
The offshore drilling powerhouse’s total adjusted revenues of $615 million beat the Zacks Consensus Estimate of $605 million. However, adjusted revenues fell 4.3% from the year-earlier figure of $653 million.
Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. price-consensus-eps-surprise-chart | Transocean Ltd. Quote
Segmental Revenue Breakup
Transocean’s Ultra-deepwater floaters contributed to 66.5% of the total contract drilling revenues, while Harsh Environment floaters accounted for the remaining 33.5%. In the first quarter of 2022, revenues from the Ultra-deepwater and Harsh Environment floaters totaled $390 million and $196 million, respectively, compared with the corresponding year-ago quarter’s reported figures of $436 million and $217 million.
Revenue efficiency was 94.9%, higher than the 94.5% reported sequentially but lower than the year-ago value of 97.4%.
Dayrates, Utilization & Backlog
Average dayrates in the quarter declined to $334,500 from the year-ago level of $373,700 but beat the Zacks Consensus Estimate of $319,000. RIG witnessed a strong year-over-year increase in average revenues per day from Harsh Environment floaters from $377,800 to $399,100 but a decrease in the same from Ultra-deepwater floaters from $371,600 in the year-ago quarter to $305,600. Overall, fleet utilization was 52.7% in the quarter, up marginally from the prior-year period’s utilization rate of 52.6%.
Transocean’s backlog record of $6.1 billion for the quarter reflects a sequential decrease from $6.5 billion in the last quarter.
Costs, Capex & Balance Sheet
Operating and maintenance costs decreased to $412 million from $435 million a year ago. The company spent $106 million on capital investments in the first quarter. Cash used in operating activities stood at $1 million. The company had cash and cash equivalents worth $911 million as of Mar 31, 2022. The long-term debt was $6.37 billion, with a debt-to-capitalization of 36.4% as of the same date.
For the second quarter of 2022, this offshore drilling contractor expects adjusted contract drilling revenues of $705 million and second-quarter operations and maintenance expenses are projected at approximately $460 million. For full-year 2022, Transocean anticipates adjusted revenues of approximately $2.7 billion and operations and maintenance expenses of $1.7 billion. Its general and administrative expenses for the second quarter are expected at around $50 million and between $180 million and $185 million for the full year. Net interest expenses for the second quarter are forecast to be approximately $98 million and about $395 million for 2022. The liquidity projection includes the estimated 2022 Capital Expenditure (capex) of $1.3 billion, which includes $1.2 billion related to newbuilds and $80 million for maintenance capex.
Finally, cash taxes are expected at about $10 million for the second quarter and roughly $28 million for the year.
Zacks Rank & Stocks to Consider
Transocean currently has a Zacks Rank #3 (Hold). Some players from the energy space who came out with their earnings reports recently include Chevron CVX, Shell plc SHEL and BP plc BP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chevron Corporation reported adjusted first-quarter earnings per share of $3.36, missing the Zacks Consensus Estimate of $3.44 on a weaker-than-expected performance in the downstream segment.
As of Mar 31, Chevron had $11.7 billion in cash and cash equivalents and total debt of $29.3 billion, with a debt-to-total capitalization of 16.7%. CVX paid out $2.7 billion in dividends and bought back $1.3 billion worth of its shares.
Shell reported first-quarter earnings per American Depositary Share (“ADS”) on a current cost of supplies basis, excluding items, of $2.38. The bottom line surpassed the Zacks Consensus Estimate of $2.12 due to higher commodity prices.
As of Mar 31, 2022, Shell had $38.4 billion in cash and $86 billion in debt (including short-term debt). In the quarter, SHEL generated cash flow from operations of $14.8 billion, returned $2 billion to its shareholders through dividends and spent $4.2 billion cash on capital projects.
BP plc reported first-quarter 2022 adjusted earnings of $1.92 per ADS on a replacement-cost basis, excluding non-operating items. The bottom line beat the Zacks Consensus Estimate of earnings of $1.41 per share due to the higher realizations of commodity prices.
BP plc announced plans to execute a $2.5-billion share buyback, which is expected to be complete before reporting second-quarter results. BP anticipates buying back $1 billion worth of shares every quarter, considering the Brent crude price at $60 per barrel.
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