Transocean’s Quarterly Loss Widens, Revenue Up

on Nov 5, 2012

On 4 November 2012, the world’s largest provider of offshore contract drilling services for oil and gas wells, Transocean Ltd (NYSE:RIG), published its results for the third quarter of 2012. And while the offshore rig contractor’s profit beat analysts’ earlier estimations, the company reported a wider loss in the third quarter, attributed to a significant writedown on a large rig sale.

**Transocean Benefits from More Rig Deployment**
In its press release, the Switzerland-based Transocean said that its 2012 Q3 revenues were $2.440 billion (£1.528 billion), up from $2.352 billion in the second quarter of 2012. Contract drilling revenues increased $136 million mostly on account of higher revenue efficiency, or the actual revenue compared with what the company could have earned. The company reports that other revenues decreased $48 million to $130 million for the third quarter 2012, mainly due to decreased levels of low-margin drilling management services activity.

The revenue results, however, surpassed expectations with Reuters reporting that excluding one-time items, Transocean made $1.29 per share, compared with the 76 cents per share which analysts expected on average.
Bloomberg reports that discoveries off the coast of Brazil and West Africa, as well as in the Gulf of Mexico have boosted the number of deep-water drilling rigs, and have also helped the demand for services such as well completion. In 2012, the US has issued the most deep-water oil-drilling permits for the Gulf since 2007, with crude oil prices reviving exploration.

“The whole story and the whole benefit to them is uptime and working efficiently, which has just plagued them for the last year,” notes Brian Uhlmer a Global Hunter Securities LLC analyst, as quoted by Bloomberg. “You’re seeing ongoing improvement, but you’re not quite to the point where everything is working well.”
**Quarterly Loss Widens on Rig Sale Writedown**

!m[The World’s Largest Offshore Rig Contractor Suffers From Sale Writedown](/uploads/story/719/thumbs/pic1_inline.png)Despite the higher rig deployment, the writedown on the rig sale meant that Transocean’s quarterly loss widened, with the company reporting $381 million, or $1.06 a share, relative to a loss of $32 million, or 10 cents a share, in the same quarter of 2011.

Bloomberg reports that in September, Transocean agreed to sell 38 shallow- water drilling rigs for $1.05 billion to Shelf Drilling International, a newly formed company owned by private-equity investors, with Transocean saying that it expected to recognise a “significant” loss on the sale. In its statement, the offshore drilling contractor indicated that its quarterly net loss was “primarily associated with the impairment of assets included in discontinued operations.”
**Rivals’ Results**
In the meantime, Transocean’s nearest rival Ensco Plc (NYSE:ESV) posted stronger-than-expected quarterly profits. The London-based offshore drilling provider reported a 68 percent increase in third-quarter earnings, and 59 percent growth in operating income, relative to the same period in 2011. Reuters reports that other peers such as Noble Corp (NYSE:NE) and Diamond Offshore Drilling Inc (NYSE:DO) forecast steadily rising demand for deepwater rigs.
Transocean, which this year has gained 20 percent, fell 5 cents to $46.06 on November 2 in New York, as reported by Bloomberg.


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