Transocean Beats EPS, Misses Rev - Analyst Blog

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Offshore drilling giant Transocean Ltd. ( RIG ) reported better-than-expected fourth-quarter 2012 earnings, reflecting better utilization levels and controlled operating costs.

Earnings per share, excluding special items, came in at 91 cents, surpassing the Zacks Consensus Estimate of 81 cents and the year-ago adjusted profit of 26 cents.

Revenue

Total quarterly revenues of $2,326.0 million fell short of the Zacks Consensus Estimate of $2,348.0. However, comparing year over year, revenue was up 9.0% mainly attributable to higher average dayrates.

Transocean's high-spec floaters contributed approximately 73% to total revenue, while mid-water floaters and jackup rigs accounted for 20% and 5% of the total, respectively. The remaining revenue came from other rig activities, integrated services and others.

Operating Statistics

Transocean posted operating income of $541.0 million during the quarter compared with a loss of $5,811.0 million in the year-ago period. Total operating and maintenance expenses decreased 38.9% to $1,438.0 million due to a drop in costs.

Dayrates & Utilization

Compared with the fourth quarter of 2011, dayrates moved up 3.3% (to $382,000 from $369,900), thanks to improved dayrates among midwater, high-spec floaters and jackups.

Overall fleet utilization was 79%, up from the year-ago utilization rate of 72%.

Capital Expenditure & Balance Sheet

Capital expenditures during the quarter, totaled $657 million, of which the lion's share went to Transocean's contract drilling services segment. As of Dec 31, 2012, Transocean had cash and cash equivalents of $5,134.0 million and long-term debt of approximately $10,929.0 million (representing a debt-to-capitalization ratio of approximately 41.0%).

Zacks Rating

The company currently retains a Zacks Rank #3 (Hold).

With less oil being discovered on land and companies having to dig deeper to get to their reserves, Transocean is poised to benefit from a market that has a robust multi-year demand trend, given its technologically advanced and versatile drilling fleet.

In particular, Transocean is the industry leader in deep sea drilling. The company's state-of-the-art mobile offshore drilling fleets worldwide can function in most challenging environments, such as the North Sea.

However, the introduction of new and more stringent regulations due to the oil spill will likely make deepwater drilling activity prohibitively expensive for exploration and production companies, making many projects less profitable. This could reduce the demand for deepwater drilling.

Meanwhile, there are other energy firms that offer value and are worth buying now. These include Northern Tier Energy LP ( NTI ) with Zacks Rank #1 (Strong Buy) as well as Helmerich & Payne Inc. ( HP ) and Patterson-UTI Energy Inc. ( PTEN ), each with a Zacks Rank #2 (Buy).



HELMERICH&PAYNE (HP): Free Stock Analysis Report

NORTHERN TIER (NTI): Free Stock Analysis Report

PATTERSON-UTI (PTEN): Free Stock Analysis Report

TRANSOCEAN LTD (RIG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HP , NTI , PTEN , RIG

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