Transocean Beats on Q4 Earnings, Lags Revs - Analyst Blog
February 27 2014 - 10:00AM
Zacks
Offshore drilling giant,
Transocean Ltd. (RIG), reported
better-than-expected fourth-quarter 2013 earnings on higher
dayrates.
Earnings per share (excluding special items) came in at 73 cents,
surpassing the Zacks Consensus Estimate by a penny.
However, the figure fell 19.8% from the year-ago adjusted profit of
91 cents per share. Decreased rig utilization along with elevated
operating and maintenance costs led to the decline.
Quarterly total revenue of $2,332.0 million failed to beat the
Zacks Consensus Estimate of $2,373.0 million. However, the top line
was up a marginal 0.3% from $2,326.0 million reported in the
year-ago period.
Transocean's high-spec floaters contributed approximately 70.2% to
the total revenue, while mid-water floaters and high-spec jackup
rigs accounted for 18.4% and 6.1%, respectively. The remaining
revenues came from rig activities, integrated services and
others.
For the year ended Dec 31, 2013, Transocean reported income
(excluding non-operating items) of $4.11 per share, below the Zacks
Consensus Estimate of $4.14. However, the figure came ahead of the
year-ago adjusted profit of $3.95. Revenues were recorded at $9.5
billion against the year-ago number of $9.2 billion.
Operating Statistics
Transocean posted operating income of $407.0 million during the
quarter, down 24.8% from $541.0 million in fourth-quarter 2012.
Total operating and maintenance
expenses increased 6.5% to $1,532.0 million.
Dayrates & Utilization
Total average dayrates increased to $393,100 in the reported
quarter as compared with $382,000 in the fourth quarter of 2012.
The improvement can be attributed to higher dayrates from Midwater
Floaters and High-Specification Jackups.
Overall fleet utilization was 75%, down from the year-ago
utilization rate of 79%.
Guidance
Transocean is expected to invest
roughly $2.6 billion in 2014. The company also forecasts 2014
operating and maintenance expenses in the band of $5.2−$5.4
billion.
Capital Expenditure & Balance Sheet
Capital expenditures during the quarter totaled $948.0 million.
As of Dec 31, 2013, Transocean had cash and cash equivalents of
$3,243.0 million and long-term debt of $10,379.0 million
(representing a debt-to-capitalization ratio of approximately
38.7%).
Agreement
Transocean reported that it has entered into a deal with an
affiliate of Singapore-based Sembcorp Marine. Per the agreement,
Sembcorp Marine’s subsidiary will manufacture two dynamically
positioned ultra-deepwater drillships. Transocean projects $1.24
billion of capital expenses for the construction of the drillships.
The company anticipates the delivery of the two drillships by the
second quarter of 2017 and first quarter of 2018, respectively.
Zacks Rating
Transocean currently carries a Zacks Rank #4 (Sell), implying that
it is expected to underperform the broader U.S. equity market over
the next one to three months.
Meanwhile, one can consider better-ranked players in the oil and
gas drilling sector like Helmerich & Payne
Inc. (HP), Patterson-UTI Energy Inc.
(PTEN) and Seadrill Partners LLC (SDLP). All the
players sport a Zacks Rank #1 (Strong Buy).
HELMERICH&PAYNE (HP): Free Stock Analysis Report
PATTERSON-UTI (PTEN): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
SEADRILL PTNRS (SDLP): Free Stock Analysis Report
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