Sunday, February 20, 2011

Transocean Ltd. (NYSE: RIG): Q4 Earnings Preview 2010

Transocean Ltd. (NYSE: RIG), the world's largest offshore rig contractor, is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, February 23, 2011. Analysts, on average, expect the company to report earnings of 92 cents per share on revenue of $2.31 billion. In the year ago period, the company reported earnings of $2.21 per share on revenue of $2.73 billion.

Transocean Ltd. provides offshore contract drilling services for oil and gas wells worldwide. As of February 2, 2010, the Company owned, had partial ownership interests in, or operated 138 mobile offshore drilling units.

In the preceding third quarter, the Zug, Switzerland-based company's net income was $368 million, or $1.15 a share, compared with a profit of $710 million, or $2.19 a share, in the year-earlier quarter. Third quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $148 million, or $0.46 per diluted share. These charges were related to various litigation matters, the impairment of intangible assets, the retirement of debt and certain merger-related costs, partially offset by income related to discrete tax items and gains on settlements of certain tax matters. Revenue declined to $2.31 billion from $2.82 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $1.36 per share on revenue of $2.47 billion. 

Transocean and other rig owners have been idling shallow- water rigs for the past year as an onshore drilling boom in North America led to oversupplies of natural gas and sinking prices. Jack-up rig demand is most affected because the majority of coastal, shallow-water drilling involves gas prospects. Energy explorers have been more keen to drill oil-rich prospects farther from shore to capitalize on heftier profits from pumping crude. Transocean had 35 jack-up rigs inactive as of Jan. 13, or 55 percent of its jack-up fleet, according to a company filing with the U.S. Securities and Exchange Commission.

Early in February the offshore drilling contractor said that it expects its fourth quarter results to include an after-tax non-cash charge of $1.009 billion or $3.16 per share related to impairment of Standard Jackup fleet. The company noted that the impairment resulted from projected declines in dayrates and utilization, which adversely impacted the asset group. More than half of the rigs were either idle or classified as "stacked" -- pulled off the market -- as of Transocean's latest fleet status report in January.

Recently, the company said that it would seek shareholder approval for a U.S. dollar-denominated dividend of about U.S. $1 billion out of additional paid-in capital and payable in four quarterly installments. The contract drilling service provider's plans to pay a similar dividend last year was blocked by regulators in Switzerland, due to lawsuits that arose after the oil spill in the Gulf of Mexico.

Transocean owned the Deepwater Horizon drilling rig, which was leased to BP PLC (NYSE: BP) when the rig sank into the Gulf of Mexico after an April 20 explosion, killing 11 workers and unleashing the worst offshore oil spill in U.S. history. The rig was insured for $560 million -- already paid to Transocean - but experts say Transocean probably will be forced to help BP pay for the disaster.

Full Disclosure: None.
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