Offshore drilling giant Transocean Ltd. RIG reported better-than-expected second-quarter 2015 results on significant decline in operating and maintenance expenses. The company’s cost cutting measures to withstand weak drillship demand owing to a freefall in oil prices led to lower expenses.
Earnings per share (excluding special items) came in at $1.11, which breezed past the Zacks Consensus Estimate of 50 cents. However, the bottom line declined from the year-ago adjusted earnings of $1.61.
Quarterly total revenue of $1,884 million beat the Zacks Consensus Estimate of $1,701 million. The top line, however, fell from the year-ago quarter figure of $2,328 million.
Transocean's high-spec floaters contributed about 66.7% to total revenue, while mid-water floaters and high-spec jackup rigs accounted for approximately 20.2% and 7.2%, respectively. The remaining was generated from rig activities, integrated services and others.
Operating Statistics
Transocean’s operating income of $506 million during the quarter decreased from $765 million in second-quarter 2014. Significant loss on impairment activities hampered the results.
Most importantly, total operating and maintenance expenses, slipped about 83.8% year over year to $197 million. This reflects the company’s cost cutting measures to weather lower drillship demand following plunging crude prices.
Dayrates & Utilization
Total average dayrates decreased to $399,700 in the quarter under review from $410,000 in the year-earlier quarter. Lower dayrates from ultra-deepwater and deepwater floaters led to the decline.
Overall fleet utilization was 75%, down from the year-ago utilization rate of 78%.
Capital Expenditure & Balance Sheet
Capital expenditures during the quarter totaled $195 million.
As of Jun 30, 2015, Transocean had cash and cash equivalents of $3,769 million and long-term debt of $8,989 million (representing a debt-to-capitalization ratio of approximately 49%).
Zacks Rank
Transocean currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy sector are Seadrill Partners LLC SDLP, Valero Energy Partners LP VLP and CVR Refining, LP CVRR. All these stocks sport a Zacks Rank #1 (Strong Buy).
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