Offshore drilling giant
Transocean Ltd.
(
RIG
) reported weak fourth quarter and full-year 2011 results, hurt by
the lingering effects of Gulf of Mexico tragedy, steeper operating
costs and high interest expense.
Earnings per share, excluding expenses associated with the
Macondo well incident, Aker Drilling acquisition costs, gains from
asset sales and other minor items, came in at 19 cents, a penny
short of the Zacks Consensus Estimate and significantly behind the
year-ago adjusted profit of 76 cents.
For the full year, earnings per share, excluding one-time costs,
were $1.45, down 1.4% from our projection of $1.47 per share.
Comparing year over year, the reported results declined heavily
from $6.00 earned in the prior year.
Revenue
Total quarterly revenues of $2,422.0 million were above the
Zacks Consensus Estimate by 4.0%. The result also improved 13.9%
year over year, mainly attributable to the addition of new rigs
along with higher utilization.
Transocean generated revenues of $9,142 million in fiscal 2011,
compared with $9,466 million in 2010 but surpassed our projection
of $9,069 million.
During the quarter, Transocean's high-spec floaters contributed
approximately 66% to the total revenue, while mid-water floaters
and jackup rigs accounted for 14% and 12%, respectively. The
remaining revenue came from other rig activities, integrated
services and others.
Operating Statistics
Quarterly operating and maintenance expenses were $2,565.0
million, 91.6% higher than the fourth quarter of 2010, primarily
reflecting estimated loss contingencies related to the Macondo well
accident and unscheduled costs from contract termination.
Dayrates & Utilization
Quarterly average dayrates increased 1.8% from the September
quarter to $295,400, as high-spec floaters dayrates improved 1.6%,
partially offset by a 4.6% and 7.0% respective decline in mid-water
floater and standard jackup dayrates.
Compared to the fourth quarter of 2010, dayrates rose 6.7% from
$276,900, favorably impacted by a 17.4% rise in high-spec floater
dayrates, offset to some extent by, respectively, 13.1% and 15.6%
lower dayrates among high-spec jackups and standard jackups.
Overall fleet utilization was 61% during the quarter, up from
the prior quarter and year -ago level of 58%.
Capital Expenditure & Balance Sheet
Capital expenditures during the quarter totaled $350 million
(versus $300 million in the prior-year quarter) netting $1,020
million for the full year (as against $1,391 million in 2010).
As of December 31, 2011, Transocean had cash/cash equivalents of
$4,017.0 million and long-term debt of approximately $10,756.0
million (representing a debt-to-capitalization ratio at
approximately 40.7%).
Guidance
For 2012, Transocean expects operating and maintenance costs to
range between $6,150 million and $6,350 million. The company also
aims to invest about $1,200 million to $1,300 million on capital
programs.
Our Recommendation
Transocean, which competes with
Diamond Offshore
(
DO
) and
Noble Corp
(
NE
), currently retains a Zacks #3 Rank, translating into a short-term
Hold rating. We are also maintaining our long-term Neutral
recommendation on the stock.
With its technologically advanced and versatile offshore
drilling fleet, strong backlog, considerable pricing power and
improved utilization rates, the company offers an unmatched level
of earnings and cash flow visibility.
However, we expect the Deepwater Horizon incident to continue to
create some overhang on Transocean shares in the coming quarters.
Moreover, the high debt level, increased operating expenses and
international business risks adds to our negative sentiment.
DIAMOND OFFSHOR (
DO
): Free Stock Analysis Report
NOBLE CORP (
NE
): Free Stock Analysis Report
TRANSOCEAN LTD (
RIG
): Free Stock Analysis Report
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