Offshore drilling giant Transocean Limited RIG reported wider-than-expected loss per share in the first quarter of 2018. Notably the company, which had not missed earnings estimates since 2013, recently reported an adjusted loss of 48 cents per share in the quarter under review, wider than the Zacks Consensus Estimate of a loss of 36 cents.
Increased operational costs due to the acquisition of Songa Offshore adversely impacted the results.
The bottom line further deteriorated from earnings of a penny in the year-ago quarter. The loss also widened from 24 cents per share incurred in the last reported quarter.
Revenues of $664 million topped the Zacks Consensus Estimate of $657 million on higher fleet utilization. The top line also increased 5.6% sequentially. However, revenues witnessed a year-over-year decline of 10%. The year-over-year decrease is attributed to lower contract drilling revenues from the Ultra-Deepwater floaters.
Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. Price, Consensus and EPS Surprise | Transocean Ltd. Quote
Transocean's High-Specification floaters contributed about 87.6% to the total contract drilling revenues, while Deepwater floaters, Midwater floaters, High-Specification Jackups accounted for the remainder.
Revenue efficiency in the quarter reduced to 91.5%, compared with 97.8% and 92.4% in the year-ago quarter and the prior quarter, respectively.
Transocean's operating and maintenance expenses rose 22.2% to $424 million year over year. Costs also increased from the prior-quarter figure of $389 million. The general and administrative expenses moved up 20.5% from the year-ago figure to a total of $47 million.
The year-over year decline in revenues and operational inefficiency resulted in the company's cash flow from operating activities to plunge 43.1% from the first quarter of 2017. In the first quarter of 2018, cash flow from operating activities stood at $103 million compared with $181 million and $244 million recorded in the first quarter of 2017 and fourth-quarter 2017, respectively.
Dayrates and Utilization
Compared with the first quarter of 2017, dayrates fell almost 17.4% (from $337,700 to $287,600), unfavorably impacted by huge decline in the Ultra-Deepwater floaters' average daily revenues.
However, overall fleet utilization was 52% during the quarter, up from the year-ago utilization rate of 43% but nominally below 53% recorded in the prior quarter.
During the quarter, the company closed the acquisition of Norwegian contractor, Songa Offshore, which has boosted the backlog of Transocean by $3.7 billion and enhanced its long-term opportunities in the Norwegian markets. Transocean's strong backlog, which stands at $12.5 billion as of Apr 2018, reflects steady demand from its customers.
Capital Expenditure & Balance Sheet
Transocean spent $53 million on capital expenditures in the first quarter of 2018. As of Mar 31, 2018, Transocean had cash and cash equivalents of $2,712 million. Long-term debt of the company was $7,976 million, with a debt-to-capitalization ratio of 37.3%.
Zacks Rank & Key Picks
Transocean has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the oil and energy sector are China Petroleum & Chemical Corporation or Sinopec SNP , Crescent Point Energy Corporation CPG and Canadian Natural Resources Limited CNQ , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Sinopec delivered an average positive earnings surprise of 492.75% in the trailing four quarters.
Crescent Point surpassed earnings estimates in three of the four trailing quarters, with an average of 363.54%.
Canadian Natural delivered an average positive earnings surprise of 0.78% in the trailing four quarters.
Wall Street's Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It's a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report China Petroleum & Chemical Corporation (SNP): Free Stock Analysis Report Canadian Natural Resources Limited (CNQ): Free Stock Analysis Report Crescent Point Energy Corporation (CPG): Free Stock Analysis Report Transocean Ltd. (RIG): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research