Transocean Ltd.'s second-quarter profit narrowed sharply as the
offshore oil driller logged nearly $800 million in charges as it
continues to trim its fleet amid lower crude prices.
The latest charges, part of what the company called "near
fanatical" cost-cutting, are largely tied to its midwater floater
fleet and assets held for sale.
Still, the results beat the Wall Street consensus, sending
shares up nearly 4% to $12.80 in late trading.
Through Wednesday's closing, the company's stock was down nearly
33% for the year.
The Switzerland-based company, which boasts the world's largest
fleet of offshore drilling rigs, is trying to recover from an
ill-timed expansion just before oil prices collapsed. It slashed
its dividend to 60 cents a share, from $3 a share, and sharply cut
its number of rigs, taking some out of service and scrapping
others. It projects it would spend $1.7 billion in capital
projects, compared with $2.17 billion in 2014.
Meanwhile, the oil-price slump has also impaired results of the
master limited partnership it formed to boost its financial
structure and mollify friction with billionaire investor Carl C.
Icahn. Shares of Transocean Partners LLC, closed at $12.61 on
Wednesday, down 43% from its initial public offering price.
Oil prices—down about 56% from a $114 high for Brent crude oil
price a barrel in 2014—remain volatile amid a supply glut, economic
slowdown in China, and the prospect that Iranian oil may flood
markets following a nuclear accord with the U.S. and other world
powers.
On Wednesday, oil prices fell again on disappointing weekly
inventory data from the U.S. Energy Information Administration.
Overall, Transocean reported a profit of $342 million, or 93
cents a share, compared with $587 million, or $1.61 a share, a year
earlier. The year-ago results included a two-cent loss from
discontinued operations.
Excluding the impact of assets impairment, legal matters and
other items, profit was $1.11 a share.
Revenue fell 19% to $1.88 billion.
Analysts surveyed by Thomson Reuters expected a profit of 50
cents a share on $1.7 billion in revenue.
Contract backlog was $18.6 billion as of July 15, down from
$19.9 billion as of April 16 and $21.2 billion on Feb. 17.
Royal Dutch Shell PLC and Chevron Corp. accounted for about 41%
and 20%, respectively, of Transocean's contract backlog as of Feb.
17, according to regulatory filings. Both companies have cut
spending to counter the sharp decline in crude prices, but oil
still trades below their lowered price assumptions, suggesting
further cuts.
Fleet utilization, meanwhile, declined to 75%, from 79% in the
previous quarter and 78% in the year-ago period. For the first six
months of the year, however, fleet utilization was slightly down at
77%, compared with 78% for the year-ago period.
Transocean recognized $788 million from settlements related to
the 2010 Deepwater Horizon oil spill. Transocean owned and operated
the Deepwater Horizon drilling rig.
Write to Maria Armental at maria.armental@wsj.com
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