Transocean Ltd. (RIG:US), the world’s largest offshore rig contractor, reported earnings that exceeded analysts’ estimates for the third consecutive quarter as it reduced costs. The shares rose the most in a year.
Excluding costs from the sale of rigs and other one-time items, third-quarter profit was $1.37 a share, 73 percent more than the average of 35 estimates (RIG:US) compiled by Bloomberg. Sales climbed to $2.44 billion, 23 percent more than a year earlier, Vernier, Switzerland-based Transocean said in a statement yesterday.
The company agreed in September to sell 38 shallow-water drilling rigs for $1.05 billion to Shelf Drilling International, a newly formed company owned by private-equity investors and management. It also cut costs during the quarter for ultra- deepwater rigs, which charge the highest rates, by 14 percent to $443 million, according to a separate statement on its website.
“A noisy earnings release had been anticipated due to the disposal of the standard jackups, and indeed this report does contain a large number of distortive elements,” according to a note today from analysts at Simmons & Co. in Houston. “The underlying results here ultimately represent a massive beat versus expectations from both a revenue and cost perspective.”
Transocean rose (RIG:US) 5.6 percent to $48.64 at the close in New York, the biggest gain since October 2011.
Discoveries off the coasts of Brazil and West Africa and in the U.S. Gulf of Mexico have helped boost the number of deep- water drilling rigs and the demand for services including well completion. The number of industry rigs operating in the Gulf rose 60 percent to an average of 48 during the third quarter from 30 a year earlier, according to Baker Hughes Inc. (BHI:US)
The U.S. has issued the most deep-water oil-drilling permits for the Gulf this year since 2007 as high crude prices revive exploration slowed by the 2010 BP Plc (BP/) spill. Transocean owned the Deepwater Horizon, the drilling rig that exploded and sank at the Macondo well.
Including an $878 million one-time cost, mostly attributed to exiting the shallow-water rig business, Transocean’s net loss widened to $381 million, or $1.06 a share, from a loss of $32 million, or 10 cents, a year earlier.
Total capital spending is expected to rise to $3 billion next year from as much as $1.65 billion this year as it makes payments on new-build drillships, Chief Financial Officer Greg Cauthen told analysts and investors today on a conference call.
Transocean expects operating and maintenance costs for continued operations this year to be as much as $5.5 billion, Cauthen said. That’s expected to increase 5 to 7 percent next year as costs to operate rigs and train workers continue to climb, he said.
Legal costs related to the Macondo spill are forecast to be about $15 million to $20 million a quarter next year, Cauthen said.
The company reported 81 percent utilization during the quarter for floating rigs that command the highest rates, the most since the first quarter of 2010, said Matt Conlan, an analyst at Wells Fargo & Co. in New York.
Transocean sees having 1,744 out-of-service days for its fleet next year, the lowest since 2009 when it had 1,749 days, according to slides posted on its website today.
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