Transocean Ltd. Reports Fourth Quarter And Full Year 2014 Results
- \$992 million, \$2.75 per diluted share, resulting from a non-cash goodwill impairment. The impairment is due to the decline in the market valuation of the company's contract drilling services business. As the result of this impairment, the company has no goodwill remaining on its balance sheet.
- \$148 million, \$0.40 per diluted share, in impairments of assets classified as held for sale; and
- \$9 million, \$0.02 per diluted share, primarily associated with a loss on retirement of debt and other items.
These net unfavorable items were partially offset by:
- \$66 million, \$0.18 per diluted share, of favorable discrete tax benefits.
After consideration of these net unfavorable items, fourth quarter adjusted net income was \$344 million, or \$0.95 per diluted share.
For the three months ended December 31, 2013, the company reported net income attributable to controlling interest of \$233 million, \$0.64 per diluted share, which included net unfavorable items of \$27 million, or \$0.07 per diluted share. After consideration of these net unfavorable items, adjusted net income was \$260 million, or \$0.71 per diluted share.
Revenues for the three months ended December 31, 2014 decreased \$33 million sequentially to \$2.237 billion. The decrease was due primarily to increased idle time on several rigs partly offset by higher revenue efficiency, lower out-of-service days, and the commencement of operations in the third quarter of the company's two newbuild ultra-deepwater drillships, Deepwater Asgard and Deepwater Invictus.
Operating and maintenance expenses decreased \$8 million sequentially to \$1.310 billion due primarily to lower shipyard and maintenance expenses.
General and administrative expenses increased \$10 million from the prior quarter to \$62 million. The increase was due primarily to costs associated with the company's cost reduction initiatives and, to a lesser extent, personnel costs associated with Transocean Partners.
Transocean's fourth quarter Effective Tax Rate(4) decreased to (1.3) percent from 0.7 percent in the third quarter of 2014. The decrease was primarily associated with the impairment of goodwill and other assets and favorable changes in estimates related to prior years' tax liabilities partly offset by the impact of foreign currency losses on deferred tax assets mainly associated with the Norwegian Krone. Transocean's Annual Effective Tax Rate for the fourth quarter of 2014 was 26.5 percent versus 24.8 percent for the prior quarter. Income tax expense included an unfavorable tax expense of \$36 million, \$0.10 per diluted share, to reflect the increase in the Annual Effective Tax Rate to 18.7 percent for 2014 from 16.7 percent for the nine months ended September 30, 2014.
Interest expense, net of amounts capitalized, was \$123 million in the fourth quarter, generally unchanged from the prior quarter. Interest income was \$8 million, compared with \$6 million in the third quarter. Capitalized interest was \$24 million, down sequentially from \$33 million.
Cash flows from operating activities decreased \$316 million from third quarter 2014 to \$566 million due primarily to changes in working capital.
Capital expenditures decreased \$47 million sequentially to \$318 million.
Full Year 2014
For the year ended December 31, 2014, net loss attributable to controlling interest totaled \$1.913 billion, or \$5.29 per diluted share. Full year results included \$3.716 billion, \$10.23 per diluted share, of net unfavorable items as follows:
- \$3.826 billion, \$10.53 per diluted share, resulting from a non-cash goodwill impairment, impairment of the Deepwater Floater asset group, and impairments of assets classified as held for sale; and
- \$28 million, \$0.08 per diluted share, in net losses from discontinued operations and other miscellaneous unfavorable items.
These net unfavorable items were partially offset by:
- \$138 million, \$0.38 per diluted share, in favorable discrete tax benefits.
After consideration of these net unfavorable items, adjusted net income for 2014 was \$1.803 billion, or \$4.94 per diluted share.
Interest expense, net of amounts capitalized, was \$483 million for 2014, down from \$584 million in 2013. In addition to scheduled maturities, the decrease reflects the completion of the company's \$1.0 billion accelerated debt retirement program. Capitalized interest for 2014 was \$133 million, compared with \$78 million in 2013. Interest income was \$39 million for 2014, versus \$52 million in 2013.
Cash flow from operating activities totaled \$2.220 billion in 2014, compared with \$1.918 billion in 2013, an increase of \$302 million.
For the year
ended December 31, 2013, net income attributable to controlling interest
totaled \$1.407 billion, \$3.87 per diluted share, which included net
unfavorable items of \$81 million, or \$0.22 per diluted share. After
consideration of the net unfavorable items, adjusted net income for 2013
was \$1.488 billion, or \$4.09 per diluted share.
Full Year 2015 Guidance Summary
The following table is a summary of the company's full year 2015 guidance for key income statement and balance sheet items. These estimates are based upon management's current expectations and assumptions and are subject to change.