Transocean Ltd. Reports First Quarter 2017 Results

By Newsroom America Feeds at 3 May 2017

Transocean Ltd. has added a news release to its Investor Relations website.

Title: Transocean Ltd. Reports First Quarter 2017 Results

Date(s): May 3, 2017 4:15 PM

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Revenues were $785�million compared with $974�million in the fourth�quarter of 2016; Operating and maintenance expense was $343�million, including $8�million in favorable items associated with litigation matters. This compares with $314�million in the prior period, including $30�million in favorable items associated with litigation matters; Net income attributable to controlling interest was $91�million, $0.23�per diluted share, compared with $243�million, $0.64�per diluted share, in the fourth�quarter of 2016; Adjusted net income was $4�million, $0.01�per diluted share, excluding $87�million of net favorable items. This compares with $261�million, $0.69�per diluted share, in the prior quarter, excluding $18�million of net unfavorable items; EBITDA margin was 52�percent, compared with 59�percent in the fourth�quarter of 2016. Adjusted Normalized EBITDA margin was 48�percent, compared with 56�percent in the prior quarter; Cash flows from operating activities were $184�million, compared with $633�million in the prior quarter; Revenue efficiency(1) was 97.8�percent, compared with 100.3�percent in the fourth�quarter of 2016; and Contract backlog was $10.8�billion as of the April�2017 Fleet Status Report. ZUG, SWITZERLAND-May�3, 2017-Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest of $91�million, $0.23�per diluted share, for the three months ended March�31, 2017. First quarter 2017 results included net favorable items of $87�million, or $0.22�per diluted share as follows: $77�million, $0.20�per diluted share, in discrete tax benefits; $8�million, $0.02�per diluted share, related to favorable litigation matters; and $2�million associated with gain on a rig disposal. After consideration of these net favorable items, first�quarter 2017 adjusted net income was $4�million, or $0.01�per diluted share.Contract drilling revenues for the three months ended March�31, 2017, decreased $55�million sequentially to $738�million due primarily to reduced activity and lower revenue efficiency. These decreases were partially offset by higher dayrates on the ultra-deepwater drillship Deepwater�Invictus while working in the U.S.�Gulf of Mexico, and a full quarter's contribution from the company's newbuild drillship Deepwater�Conqueror.Other revenues decreased $134�million sequentially to $47�million due primarily to reduced early contract termination fees.Operating and maintenance expense was $343�million, including $8�million in favorable items associated with litigation matters. This compares with $314�million in the prior quarter, including $30�million in favorable items associated with litigation matters. The increase was due primarily to the commencement of operations of the Deepwater�Conqueror and a full quarter's activity on the Transocean�Arctic.General and administrative expense was $39�million, down from $47�million in the fourth quarter of 2016. The decrease was due primarily to lower restructuring costs.The Effective Tax Rate(2) was (73.0)�percent, down from (6.5)�percent in the prior quarter. The decrease was due primarily to favorable items associated with litigation matters. The Effective Tax Rate excluding discrete items(3) was 82.1�percent, up from 3.3�percent in the previous quarter. The increase was due to reduced pre-tax income.Interest expense, net of amounts capitalized, was $127�million, compared with $113�million in the prior quarter. Capitalized interest decreased $16�million sequentially to $30�million due primarily to the Deepwater�Conqueror commencing operations. Interest income was $6�million, compared with $5�million in the prior quarter.Cash flows from operating activities decreased $449�million sequentially to $184�million due to reduced operating activities. �Additionally, the prior quarter was favorably impacted by the collection of certain lump sum payments from customers.First quarter 2017 capital expenditures of $122�million were primarily related to the company's contracted, newbuild drillships. This compares with $272�million in the previous quarter."I would like to recognize and thank the entire Transocean team for producing strong first quarter operating and financial results," said Jeremy Thigpen, President and Chief Executive Officer. "Our 98%�revenue efficiency demonstrates our unwavering commitment to maximizing uptime for our customers. Our 48%�Adjusted Normalized EBITDA Margin is the direct result of our ongoing efforts to optimize our business to enhance shareholder value. And, most importantly, our 12 months without a Lost Time Incident, proves our resolve to deliver incident free operations, all the time, everywhere."Thigpen added, "This excellent and consistent performance, coupled with our industry-leading $10.8�billion backlog and solid liquidity, positions us well for a market recovery."Non-GAAP Financial MeasuresAll non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at: www.deepwater.com.About TransoceanTransocean is a leading international provider of offshore contract drilling services for oil and gas wells. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world.Transocean owns or has partial ownership interests in, and operates a fleet of 56�mobile offshore drilling units consisting of 30�ultra-deepwater floaters, seven�harsh-environment floaters, three�deepwater floaters, six�midwater floaters and 10�high-specification jackups. In addition, the company has four�ultra-deepwater drillships and five�high-specification jackups under construction or under contract to be constructed.For more information about Transocean, please visit: www.deepwater.com.Conference Call InformationTransocean will conduct a teleconference starting at 9�a.m. EDT, 3�p.m. CEST, on Thursday, May�4, 2017, to discuss the results. To participate, dial +1 913-312-1522 and refer to confirmation code�8258213 approximately 10�minutes prior to the scheduled start time.The teleconference will be simulcast in a listen-only mode over the internet and can be accessed at: www.deepwater.com, by selecting Investors, News, and Webcasts. Supplemental materials that may be referenced during the teleconference will be posted to Transocean's website and can be found by selecting Investors, Financial Reports.A replay of the conference call will be available after 12�p.m. EDT, 6�p.m. CEST, on May�4, 2017. The replay, which will be archived for approximately 30�days, can be accessed at +1 719-457-0820, passcode�8258213 and PIN�9876. The replay will also be available on the company's website.Forward-Looking StatementsThe statements described in this press release that are not historical facts are forward-looking statements within the meaning of Section�27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements contain words such as "possible," "intend," "will," "if," "expect," or other similar expressions. Forward-looking statements are based on management's current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, estimated duration of customer contracts, contract dayrate amounts, future contract commencement dates and locations, planned shipyard projects and other out-of-service time, sales of drilling units, timing of the company's newbuild deliveries, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, the future prices of oil and gas, the intention to scrap certain drilling rigs, the results of our final accounting for the periods presented in this press release and other factors, including those and other risks discussed in the company's most recent Annual Report on Form�10-K for the year ended December�31, 2016, and in the company's other filings with the SEC, which are available free of charge on the SEC's website at: www.sec.gov. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law. All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company's website at: www.deepwater.com.This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do not constitute an offering prospectus within the meaning of article�652a or article�1156 of the Swiss Code of Obligations. Investors must rely on their own evaluation of Transocean and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean.Notes Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage. Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. See the accompanying schedule entitled "Revenue Efficiency." Effective Tax Rate is defined as income tax expense for continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis." Effective Tax Rate excluding discrete items is defined as income tax expense from continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income from continuing operations before income tax expense excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis." Analyst Contacts:������������������������������������������������������������������ Bradley Alexander+1 713-232-7515Diane Vento+1 713-232-8015Media Contact:Pam Easton+1 713-232-7647 TRANSOCEAN LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(In�millions, except share data)(Unaudited) � � � � � � � � � � Three months ended� � � � March�31,� � � � 2017 � 2016 � � � � � � � � � Operating revenues � � � � � � � Contract drilling revenues � $ �738 � $ �1,111 � Other revenues � � �47 � � �230 � � � � �785 � � �1,341 � Costs and expenses � � � � � � � Operating and maintenance � � �343 � � �655 � Depreciation � � �232 � � �217 � General and administrative � � �39 � � �43 � � � � �614 � � �915 � Loss on impairment � � �- � � �(3) � Gain on disposal of assets, net � � �2 � � �1 � Operating income � � �173 � � �424 � � � � � � � � � Other income (expense), net � � � � � � � Interest income � � �6 � � �6 � Interest expense, net of amounts capitalized � � �(127) � � �(89) � Other, net � � �3 � � �(1) � � � � �(118) � � �(84) � Income from continuing operations before income tax expense � � �55 � � �340 � Income tax expense (benefit) � � �(40) � � �98 � Income from continuing operations � � �95 � � �242 � Loss from discontinued operations, net of tax � � �- � � �(1) � � � � � � � � � Net income � � �95 � � �241 � Net income attributable to noncontrolling interest � � �4 � � �6 � Net income attributable to controlling interest � $ �91 � $ �235 � � � � � � � � � Earnings per share-basic � � � � � � � Earnings from continuing operations � $ �0.23 � $ �0.64 � Earnings from discontinued operations � � �- � � �- � Earnings per share � $ �0.23 � $ �0.64 � � � � � � � � � Earnings per share-diluted � � � � � � � Earnings from continuing operations � $ �0.23 � $ �0.64 � Earnings from discontinued operations � � �- � � �- � Earnings per share � $ �0.23 � $ �0.64 � � � � � � � � � Weighted-average shares outstanding � � � � � � � Basic � � �390 � � �364 � Diluted � � �390 � � �364 � TRANSOCEAN LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In�millions, except share data)(Unaudited) � � � � � � � � � � March�31,� � December�31,� � � � 2017 � 2016 � � � � � � � � � Assets � � � � � � � Cash and cash equivalents � $ �3,093 � $ �3,052 � Accounts receivable, net of allowance for doubtful accounts of less than $1 at March 31, 2017 and December 31, 2016 � � �850 � � �898 � Materials and supplies, net of allowance for obsolescenceof $154 and $153 at March 31, 2017 and December 31, 2016, respectively � � �553 � � �561 � Restricted cash � � �442 � � �466 � Other current assets � � �133 � � �121 � Total current assets � � �5,071 � � �5,098 � � � � � � � � � Property and equipment � � �27,459 � � �27,372 � Less accumulated depreciation � � �(6,493) � � �(6,279) � Property and equipment, net � � �20,966 � � �21,093 � Deferred income taxes, net � � �309 � � �298 � Other assets � � �371 � � �400 � Total assets � $ �26,717 � $ �26,889 � � � � � � � � � Liabilities and equity � � � � � � � Accounts payable � $ �162 � $ �206 � Accrued income taxes � � �76 � � �95 � Debt due within one�year � � �1,458 � � �724 � Other current liabilities � � �851 � � �960 � Total current liabilities � � �2,547 � � �1,985 � � � � � � � � � Long-term debt � � �6,937 � � �7,740 � Deferred income taxes, net � � �170 � � �178 � Other long-term liabilities � � �1,128 � � �1,153 � Total long-term liabilities � � �8,235 � � �9,071 � � � � � � � � � Commitments and contingencies � � � � � � � Redeemable noncontrolling interest � � �35 � � �28 � � � � � � � � � Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at March 31, 2017 and December 31, 2016 and 390,930,439 and 389,366,241 outstanding at March 31, 2017 and December 31, 2016, respectively � � �37 � � �36 � Additional paid-in capital � � �11,000 � � �10,993 � Retained earnings � � �5,147 � � �5,056 � Accumulated other comprehensive loss � � �(284) � � �(283) � Total controlling interest shareholders' equity � � �15,900 � � �15,802 � Noncontrolling interest � � �- � � �3 � Total equity � � �15,900 � � �15,805 � Total liabilities and equity � $ �26,717 � $ �26,889 � TRANSOCEAN LTD. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In�millions)(Unaudited) � � � � � � � � � � Three months ended� � � � March�31,� � � � 2017 � 2016 � Cash flows from operating activities � � � � � � � Net income � $ �95 � $ �241 � Adjustments to reconcile to net cash provided by operating activities: � � � � � � � Depreciation � � �232 � � �217 � Share-based compensation expense � � �10 � � �13 � Loss on impairment � � �- � � �3 � Gain on disposal of assets, net � � �(2) � � �(1) � Deferred income tax expense (benefit) � � �(19) � � �20 � Other, net � � �7 � � �5 � Changes in deferred revenues, net � � �(68) � � �(25) � Changes in deferred costs, net � � �16 � � �35 � Changes in operating assets and liabilities � � �(87) � � �123 � Net cash provided by operating activities � � �184 � � �631 � � � � � � � � � Cash flows from investing activities � � � � � � � Capital expenditures � � �(122) � � �(368) � Proceeds from disposal of assets, net � � �4 � � �4 � Net cash used in investing activities � � �(118) � � �(364) � � � � � � � � � Cash flows from financing activities � � � � � � � Repayments of debt � � �(72) � � �(55) � Deposits to cash accounts restricted for financing activities � � �- � � �(24) � Proceeds from cash accounts and investments restricted for financing activities � � �50 � � �49 � Distributions to holders of noncontrolling interest � � �- � � �(7) � Other, net � � �(3) � � �5 � Net cash used in financing activities � � �(25) � � �(32) � � � � � � � � � Net increase in cash and cash equivalents � � �41 � � �235 � Cash and cash equivalents at beginning of period � � �3,052 � � �2,339 � Cash and cash equivalents at end of period � $ �3,093 � $ �2,574 � TRANSOCEAN LTD. AND SUBSIDIARIESFLEET OPERATING STATISTICS � � � � � � � � � � � � � Operating Revenues (in millions) � � � Three months ended� � � � March�31,� � December�31,� � March�31,� � � � 2017 � 2016 � 2016 � Contract drilling revenues � � � � � � � � � � Ultra-deepwater floaters � $ �505 � $ �560 � $ �621 � Harsh environment floaters � � �122 � � �100 � � �181 � Deepwater floaters � � �35 � � �35 � � �85 � Midwater floaters � � �13 � � �30 � � �138 � High-specification jackups � � �63 � � �66 � � �82 � Contract intangible revenue � � �- � � �2 � � �4 � Total contract drilling revenues � � �738 � � �793 � � �1,111 � � � � � � � � � � � � Other revenues � � � � � � � � � � Customer early termination fees � � �37 � � �169 � � �209 � Customer reimbursement revenues and other � � �10 � � �12 � � �21 � Total other revenues � � �47 � � �181 � � �230 � Total revenues � $ �785 � $ �974 � $ �1,341 � � � � � � � � � � � � � � Average Daily Revenue (1) � � � Three months ended� � � � March�31,� � December�31,� � March�31,� � � � 2017 � 2016 � 2016 � Ultra-deepwater floaters � $ �519,900 � $ �490,600 � $ �490,300 � Harsh environment floaters � � �276,700 � � �253,500 � � �548,600 � Deepwater floaters � � �192,000 � � �204,500 � � �310,000 � Midwater floaters � � �92,300 � � �128,600 � � �361,400 � High-specification jackups � � �141,200 � � �143,500 � � �150,200 � Total drilling fleet � $ �337,700 � � �329,400 � $ �395,400 � � � � � � � � � � � � � � � � Utilization (2) � � � � Three months ended� � � � � March�31,� � December�31,� � March�31,� � � � � 2017 � 2016 � 2016 � Ultra-deepwater floaters � � �36 %� � �43 %� � �50 %� � Harsh environment floaters � � �70 %� � �61 %� � �52 %� � Deepwater floaters � � �67 %� � �53 %� � �60 %� � Midwater floaters � � �27 %� � �37 %� � �39 %� � High-specification jackups � � �50 %� � �50 %� � �60 %� � Total drilling fleet � � �43 %� � �46 %� � �51 %� � � � � � � � � � � � � � � � � � � � � � Revenue Efficiency (3) � � � Three months ended� � Years ended � � � March�31,� � December�31,� � March�31,� � December�31,� � December�31,� � � � 2017 � 2016 � 2016 � 2016 � 2015 Ultra-deepwater floaters � � �97.8 %� � �100.1 %� � �94.3 %� � �97.8 %� � �95.1 % Harsh environment floaters � � �97.0 %� � �97.1 %� � �98.6 %� � �97.8 %� � �98.1 % Deepwater floaters � � �92.6 %� � �93.4 %� � �97.4 %� � �96.3 %� � �97.4 % Midwater floaters � � �91.3 %� � �94.7 %� � �97.6 %� � �99.0 %� � �95.2 % High-specification jackups � � �104.1 %� � �115.0 %� � �86.7 %� � �97.6 %� � �99.2 % Total drilling fleet � � �97.8 %� � �100.3 %� � �95.0 %� � �97.8 %� � �96.0 % 1. Average daily revenue is defined as contract drilling revenues earned per operating day. An operating day is defined as a calendar day during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations. 2. Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the measurement period, expressed as a percentage. 3. Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation for the measurement period, expressed as a percentage. �Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. TRANSOCEAN LTD. AND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES AND RECONCILIATIONSADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PERSHARE(in US$ millions, except per share data)����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������� � � � � � � � � � � � � � � � � � � � � � � � � � � � � YTD � � � � � � � � � � � � � 03/31/17 � � Adjusted�Net�Income � � � � � � � � � � � � � � � � � Net income attributable to controlling interest, as reported � � � � � � � � � � � � � $ �91 � � Add back (subtract): � � � � � � � � � � � � � � � � � Litigation matters � � � � � � � � � � � � � � �(8) � � Gain on disposal of assets, net � � � � � � � � � � � � � � �(2) � � Discrete tax items and other, net � � � � � � � � � � � � � � �(77) � � Net income, as adjusted � � � � � � � � � � � � � $ �4 � � � � � � � � � � � � � � � � � � � � Adjusted Diluted Earnings Per Share: � � � � � � � � � � � � � � � � � Diluted earnings per share, as reported � � � � � � � � � � � � � $ �0.23 � � Add back (subtract): � � � � � � � � � � � � � � � � � Litigation matters � � � � � � � � � � � � � � �(0.02) � � Gain on disposal of assets, net � � � � � � � � � � � � � � �- � � Discrete tax items and other, net � � � � � � � � � � � � � � �(0.20) � � Diluted earnings per share, as adjusted � � � � � � � � � � � � � $ �0.01 � � � � � � � � � � � � � � � � � � � � � � � � � YTD � QTD � YTD � QTD � YTD � QTD � QTD � � 12/31/16 � 12/31/16 � 09/30/16 � 09/30/16 � 06/30/16 � 06/30/16 � 03/31/16 � Adjusted�Net�Income � � � � � � � � � � � � � � � � � � � � � Net income attributable to controlling interest, as reported $ �778 � $ �243 � $ �535 � $ �218 � $ �317 � $ �82 � $ �235 � Add back (subtract): � � � � � � � � � � � � � � � � � � � � � Litigation matters � �(28) � � �(28) � � �- � � �- � � �- � � �- � � �- � Restructuring charges � �26 � � �11 � � �15 � � �4 � � �11 � � �7 � � �4 � Loss on impairment of assets � �91 � � �66 � � �25 � � �11 � � �14 � � �12 � � �2 � Gain on disposal of assets, net � �(13) � � �(5) � � �(8) � � �(3) � � �(5) � � �(4) � � �(1) � Gain on retirement of debt � �(148) � � �- � � �(148) � � �(110) � � �(38) � � �(38) � � �- � (Income) loss from discontinued operations � �- � � �- � � �- � � �- � � �- � � �(1) � � �1 � Discrete tax items and other, net � �(50) � � �(26) � � �(24) � � �(32) � � �8 � � �7 � � �1 � Net income, as adjusted $ �656 � $ �261 � $ �395 � $ �88 � $ �307 � $ �65 � $ �242 � � � � � � � � � � � � � � � � � � � � � � � Adjusted Diluted Earnings Per Share: � � � � � � � � � � � � � � � � � � � � � Diluted earnings per share, as reported $ �2.08 � $ �0.64 � $ �1.44 � $ �0.59 � $ �0.86 � $ �0.22 � $ �0.64 � Add back (subtract): � � � � � � � � � � � � � � � � � � � � � Litigation matters � �(0.08) � � �(0.07) � � �- � � �- � � �- � � �- � � �- � Restructuring charges � �0.07 � � �0.03 � � �0.04 � � �0.01 � � �0.03 � � �0.02 � � �0.01 � Loss on impairment of assets � �0.25 � � �0.16 � � �0.06 � � �0.03 � � �0.04 � � �0.03 � � �- � Gain on disposal of assets, net � �(0.04) � � �(0.01) � � �(0.02) � � �(0.01) � � �(0.01) � � �(0.01) � � �- � Gain on retirement of debt � �(0.40) � � �- � � �(0.40) � � �(0.30) � � �(0.11) � � �(0.11) � � �- � (Income) loss from discontinued operations � �- � � �- � � �- � � �- � � �- � � �- � � �- � Discrete tax items and other, net � �(0.12) � � �(0.06) � � �(0.06) � � �(0.08) � � �0.02 � � �0.02 � � �- � Diluted earnings per share, as adjusted $ �1.76 � $ �0.69 � $ �1.06 � $ �0.24 � $ �0.83 � $ �0.17 � $ �0.65 � TRANSOCEAN LTD. AND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES AND RECONCILIATIONSEARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION AND RELATED MARGINS(in US$ millions, except percentages) � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � QTD � � � � � � � � � � � � � � 03/31/17 � � � � � � � � � � � � � � � � � � � � � � Operating� revenues � � � � � � � � � � � � � � � � � � � $ �785 Drilling contract termination fees � � � � � � � � � � � � � � � � � � � � �(37) Adjusted Normalized Revenues � � � � � � � � � � � � � � � � � � � $ �748 � � � � � � � � � � � � � � � � � � � � � � Net income � � � � � � � � � � � � � � � � � � � $ �95 Interest expense, net of amounts capitalized � � � � � � � � � � � � � � � � � � � � �121 Income tax expense (benefit) � � � � � � � � � � � � � � � � � � � � �(40) Depreciation expense � � � � � � � � � � � � � � � � � � � � �232 EBITDA � � � � � � � � � � � � � � � � � � � � �408 � � � � � � � � � � � � � � � � � � � � � � Litigation matters � � � � � � � � � � � � � � � � � � � � �(8) Gain on disposal of assets, net � � � � � � � � � � � � � � � � � � � � �(2) Adjusted EBITDA � � � � � � � � � � � � � � � � � � � � �398 � � � � � � � � � � � � � � � � � � � � � � Drilling contract termination fees � � � � � � � � � � � � � � � � � � � � �(37) Adjusted Normalized EBITDA � � � � � � � � � � � � � � � � � � � $ �361 � � � � � � � � � � � � � � � � � � � � � � EBITDA margin � � � � � � � � � � � � � � � � � � � � 52% Adjusted EBITDA margin � � � � � � � � � � � � � � � � � � � � 51% Adjusted Normalized EBITDA margin � � � � � � � � � � � � � � � � � � � � 48% � � � � � � � � � � � � � � � � � � � � � � � � YTD � QTD � YTD � QTD � YTD � QTD � QTD � � 12/31/16 � 12/31/16 � 09/30/16 � 09/30/16 � 06/30/16 � 06/30/16 � 03/31/16 � � � � � � � � � � � � � � � � � � � � � � Operating� revenues � $ �4,161 � $ �974 � $ �3,187 � $ �906 � $ �2,281 � $ �940 � $ �1,341 Drilling contract termination fees � � �(396) � � �(169) � � �(227) � � �(9) � � �(218) � � �(9) � � �(209) Adjusted Normalized Revenues � $ �3,765 � $ �805 � $ �2,960 � $ �897 � $ �2,063 � $ �931 � $ �1,132 � � � � � � � � � � � � � � � � � � � � � � Net income � $ �827 � $ �257 � $ �570 � $ �236 � $ �334 � $ �93 � $ �241 Interest expense, net of amounts capitalized � � �389 � � �108 � � �281 � � �104 � � �177 � � �94 � � �83 Income tax expense (benefit) � � �107 � � �(15) � � �122 � � �6 � � �116 � � �18 � � �98 Depreciation expense � � �893 � � �226 � � �667 � � �225 � � �442 � � �225 � � �217 EBITDA � � �2,216 � � �576 � � �1,640 � � �571 � � �1,069 � � �430 � � �639 � � � � � � � � � � � � � � � � � � � � � � Restructuring charges � � �28 � � �11 � � �17 � � �4 � � �13 � � �8 � � �5 Litigation matters � � �(30) � � �(30) � � �- � � �- � � �- � � �- � � �- Loss on impairment of assets � � �93 � � �67 � � �26 � � �11 � � �15 � � �12 � � �3 Gain on disposal of assets, net � � �(13) � � �(5) � � �(8) � � �(3) � � �(5) � � �(4) � � �(1) Gain on retirement of debt � � �(148) � � �- � � �(148) � � �(110) � � �(38) � � �(38) � � �- (Income) loss from discontinued operations, net of tax � � �- � � �- � � �- � � �- � � �- � � �(1) � � �1 Adjusted EBITDA � � �2,146 � � �619 � � �1,527 � � �473 � � �1,054 � � �407 � � �647 � � � � � � � � � � � � � � � � � � � � � � Drilling contract termination fees � � �(396) � � �(169) � � �(227) � � �(9) � � �(218) � � �(9) � � �(209) Adjusted Normalized EBITDA � $ �1,750 � $ �450 � $ �1,300 � $ �464 � $ �836 � $ �398 � $ �438 � � � � � � � � � � � � � � � � � � � � � � EBITDA margin � � 53% � � 59% � � 51% � � 63% � � 47% � � 46% � � 48% Adjusted EBITDA margin � � 52% � � 64% � � 48% � � 52% � � 46% � � 43% � � 48% Adjusted Normalized EBITDA margin � � 46% � � 56% � � 44% � � 52% � � 41% � � 43% � � 39% TRANSOCEAN LTD. AND SUBSIDIARIESSUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS(In US$ millions, except tax rates) � � � � � � � � � � � � � Three months ended� � � � March�31,� � December�31,� � March�31,� � � � 2017 � 2016 � 2016 � Income from continuing operations before income taxes � $ �55 � $ �242 � $ �340 � Add back (subtract): � � � � � � � � � � Litigation matters � � �(8) � � �(30) � � �- � Restructuring charges � � �- � � �11 � � �5 � Loss on impairment of assets � � �- � � �67 � � �3 � Gain on disposal of assets, net � � �(2) � � �(5) � � �(1) � Gain on retirement of debt � � �- � � �- � � �- � Adjusted income from continuing operations before income taxes � � �45 � � �285 � � �347 � � � � � � � � � � � � Income tax expense (benefit) from continuing operations � � �(40) � � �(15) � � �98 � Add back (subtract): � � � � � � � � � � Litigation matters � � �- � � �(2) � � �- � Restructuring charges � � �- � � �- � � �1 � Loss on impairment of assets � � �- � � �1 � � �1 � Gain on disposal of assets, net � � �- � � �- � � �- � Changes in estimates (1) � � �77 � � �26 � � �(1) � Adjusted income tax expense from continuing operations � $ �37 � $ �10 � $ �99 � � � � � � � � � � � � Effective Tax Rate (2) � � �(73.0) %� � �(6.5) %� � �29.1 %� � � � � � � � � � � � Effective Tax Rate, excluding discrete items (3) � � �82.1 %� � �3.3 %� � �28.6 %� Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b)�valuation of allowances on deferred taxes and (c) other tax liabilities. Our effective tax rate is calculated as income tax expense for continuing operations divided by income from continuing operations before income taxes. Our effective tax rate, excluding discrete items, is calculated as income tax expense for continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income from continuing operations before income tax expense excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate.


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