Bloomberg News

Transocean Beats Analyst Expectations With Rig Cost Control

August 01, 2012

Transocean Ltd. (RIG:US), the world’s largest offshore-rig contractor, reported second-quarter profit that beat analysts’ estimates as it controlled costs to maintain its rigs, partly to satisfy more stringent safety regulations following the Macondo oil spill.

Excluding various one-time items including a $750 million charge related to Macondo, the company beat by 28 cents the average of 32 analysts’ estimates compiled by Bloomberg. Sales climbed 10 percent to $2.6 billion.

The company reported a second-quarter loss of $304 million, or 86 cents a share, compared with a profit of $124 million, or 39 cents, a year earlier, the Vernier, Switzerland-based company said in a statement today.

The number of industry rigs operating in the U.S. Gulf of Mexico rose 45 percent to an average of 45 during the second quarter from 31 a year earlier, according to Baker Hughes Inc. (BHI:US) Average daily operating costs are expected to climb in the range of 5 to 10 percent year over year, partly due to wages and maintenance, Chief Financial Officer Greg Cauthen told analysts and investors on a May 3 conference call.

“It was better revenue and better costs,” Luke Lemoine, an analyst at Capital One Southcoast in New Orleans, said in a telephone interview. He rates the shares at add, which means investors should buy the stock, and owns none.

He expected the company’s costs to climb to $1.65 billion. Instead, Transocean’s adjusted operating and maintenance expenses climbed 9.8 percent to $1.61 billion compared to the first quarter.

Revenue

The company was expected to report revenue of $2.5 billion, according to the average of 23 analyst estimates compiled by Bloomberg.

The results were released after the close of regular trading on U.S. markets. Transocean rose 0.4 percent to $48 at 5:57 p.m. in New York.

“Everybody in the industry has experienced cost inflation,” John Keller, an analyst at Stephens Inc. in Houston, said in a telephone interview before the earnings were released. He rates the shares at equalweight, which means investors should hold the stock.

Cauthen said on the call that 35 of its rigs were expected to be out of service for planned maintenance in the second quarter, a 35 percent climb from the first quarter.

Rental rates for the industry’s ultra-deepwater rigs, the world’s most complex and expensive drilling vessels, should climb 28 percent to a record $714,000 a day by the third quarter from about $560,000 in March, according to estimates by Ole Slorer, an analyst at Morgan Stanley who dubs the move a “super spike.”

Transocean owned the $365 million Deepwater Horizon rig that was destroyed in the BP Plc (BP/) oil spill in the Gulf of Mexico. The company employed nine of the 11 workers who died in the April 2010 disaster.

(Transocean scheduled a conference call to discuss first- quarter results for 10 a.m. New York time tomorrow. To access the call, go to http://www.deepwater.com.)

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • RIG
    (Transocean Ltd)
    • $34.08 USD
    • -1.07
    • -3.14%
  • BHI
    (Baker Hughes Inc)
    • $67.74 USD
    • -0.16
    • -0.24%
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