Solid Earnings from Transocean, Shares Rise - Analyst Blog

Offshore drilling giant, Transocean Ltd. RIG, reported strong first-quarter 2014 results on significant higher dayrates. The favorable result led to more than 2.0% share price rise on the NYSE, in after-market trade hours.  

Earnings per share (excluding special items) came in at $1.43, surpassing the Zacks Consensus Estimate of $1.00. The bottom line also improved from the year-ago adjusted profit of 94 cents per share.  

Quarterly total revenue of $2,339.0 million beat the Zacks Consensus Estimate of $2,254.0 million and improved from the year-ago figure of $2,184.0 million.

Transocean's high-spec floaters contributed approximately 74.5% to the total revenue, while mid-water floaters and high-spec jackup rigs accounted for 17.6% and 5.8%, respectively. The remaining revenues came from rig activities, integrated services and others.

Operating Statistics

Transocean posted operating income of $672.0 million during the quarter, up 40.3% from $479.0 million in first-quarter 2013.

Total operating and maintenance expenses decreased 6.4% year over year to $1,269.0 million.  

Dayrates & Utilization

Total average dayrates increased to $413,100 in the reported quarter from $361,200 in the first quarter of 2013. The improvement can be attributed to higher dayrates from High-Specification Floaters as well as Midwater Floaters.

Overall fleet utilization was 78%, down from the year-ago utilization rate of 80%.

Capital Expenditure & Balance Sheet

Capital expenditures during the quarter totaled $1.1 billion.

As of Mar 31, 2014, Transocean had cash and cash equivalents of $1,987.0 million and long-term debt of $10,308.0 million (representing a debt-to-capitalization ratio of approximately 37.9%).      

Spin-Off Plan

On May 5, 2014, Transocean declared its plan to create a new entity named Caledonia Offshore Drilling Company. The new firm will likely get eight midwater drilling rigs based in the U.K. North Sea. Transocean added that Caledonia Offshore Drilling Company will likely be formed by the second half of 2014.

Zacks Rating

Transocean currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the same industry like Pioneer Energy Services Corp. PES, Helmerich & Payne Inc. HP and New Source Energy Partners LP NSLP. Pioneer Energy Services sports a Zacks Rank #1 (Strong Buy), while Helmerich & Payne and New Source Energy Partners hold a Zacks Rank #2 (Buy).