Transocean Reports Disappointing Top-Line Results (RIG)

Transocean

reported a clean 3Q10 EPS of $1.35, surpassing Citi $1.27 but falling shy of the $1.36 consensus estimate. The top-line of $2.31B fell short of both Citi's $2.42B and the consensus $2.47B. EBITDA of $1.04B was slightly below Citi's $1.06B and the consensus $1.08B. The reported EPS number excludes $65M of itemized after-tax charges ($0.20/share). Revenues declined by 8% compared to our estimate of a 3% decline. The $196M sequential revenue decline was primarily due to $223M of lost revenues from the U.S. moratorium, among other and offsetting factors. Out-of-service time declined to 20 rig months in 3Q10, from 36 rig months in 2Q10, but it was slightly higher than guidance of 17 rig months. Expected 4Q10 out-of-service time increased to 23 rig months from 9 rig months previously. High-Spec Floater revenues fell by 8% compared to our estimated 2% decline. Average dayrates fell by 10% to $404k/day. The lower dayrates were in part because RIG had negotiated lower standby rates with customers on four of its GOM rigs. Citi has a $69 PT on RIG RIG is trading lower at $63.95