After reporting net loss in each of the preceding three quarters, Transocean Limited RIG witnessed a turnaround, generating net adjusted income of $30 million in the third quarter. In fact, the offshore drilling powerhouse delivered a comprehensive beat this season, surpassing both earnings and revenue estimates. After posting profitable third-quarter results, the company's shares increased 4.04% to close at $10.82 on Oct 30.
Notably, Transocean reported adjusted earnings of 6 cents per share. The Zacks Consensus Estimate for the same was pegged at a loss of 9 cents. This reflects an earnings surprise of 166.67%. The better-than expected earnings came on the back of higher-than-anticipated revenues from the ultra-deepwater floaters, which is the company's largest contributor to sales. Precisely, Ultra-Deepwater floater revenues came in at $482 million (accounting for 60% of the total sales), surpassing the Zacks Consensus Estimate of $430 million. Further, the company's total revenues of $816 million topped the Zacks Consensus Estimate of $777.9 million.
Top line of the company also increased to $816 million from the year-ago figure of $808 million, primarily on higher revenues from Harsh Environment floaters. However, the bottom line declined from the year-ago profit of 16 cents.
Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. Price, Consensus and EPS Surprise | Transocean Ltd. Quote
Segmental Revenue Break-Up
Transocean's High-Specification floaters contributed about 91.5% to total contract drilling revenues, while Deepwater floaters, Midwater floaters, High-Specification Jackups accounted for the remainder. In the quarter under review, revenues from Ultra-Deepwater and Harsh Environment floaters totalled $482 million and $265 million, respectively.
Revenue efficiency in the quarter was 95.2%, reflecting a decline from both the prior-quarter and year-ago levels of 97.4% and 97.1%, respectively.
Dayrates and Utilization
On a discouraging note, dayrates fell almost 7.5% (from $319,000 to $295,000)from the year-ago quarter, owing to decline in average daily revenues for Ultra Deepwater floaters and high specification jack ups.
However, overall fleet utilization was 65% during the quarter, up from the utilization rate of 52% and 57% recorded in the year-ago quarter and last reported quarter, respectively.
Transocean's strong backlog, which stands at $11.5 billion as of Oct 22, reflects steady demand from customers. The backlog includes $465 million in new orders awarded during the quarter under review.
Transocean's operating and maintenance expenses rose 37.5% to $447 million year over year. Depreciation costs also moved up to $201 million from $197 million in the year-ago quarter. Notably, the company incurred impairment costs of $432 million related to the retirement of two of its drillships.
In the third quarter of 2018, cash flow from operating activities came in at $214 million.
Capital Expenditure & Balance Sheet
Transocean spent $48 million on capital expenditure in the third quarter of 2018. As of Jun 30, 2018, Transocean had cash and cash equivalents of $2,307 million. Long-term debt of the company was $8,955 million, with a debt-to-capitalization ratio of 42.8% as of the same date.
Zacks Rank & Key Picks
Currently, Transocean has a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space are Parsley Energy PE , Enbridge Inc. ENB and Bonanza Creek Energy Inc. BCEI , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Parsley Energy pulled off an average positive earnings surprise of 30.68% in the trailing four quarters.
Enbridge posted an average positive earnings surprise of 35.27% in the preceding four quarters.
Bonanza Creek delivered an average positive earnings surprise of 74.88% in the last four quarters.
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