Transocean (RIG) Q3 Earnings and Revenues Beat, Shares Up

After reporting net loss in each of the preceding three quarters, Transocean LimitedRIG 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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

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