UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 6, 2009 (May 6, 2009)

 

 

TRANSOCEAN LTD.

(Exact name of registrant as specified in its charter)

 

 

 

Switzerland		000-53533		98-0599916
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

Blandonnet International Business Center Building F, 7th Floor Chemin de Blandonnet 2 Vernier, Switzerland		CH-1214
(Address of principal executive offices)		(zip code)

Registrant’s telephone number, including area code: +41 (22) 930-9000

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

Our news release dated May 6, 2009, concerning first quarter 2009 financial results, furnished as Exhibit 99.1 to this report, is incorporated by reference herein. The press release contains certain measures (discussed below) which may be deemed “non-GAAP financial measures” as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended.

In the press release, we discuss field operating income for the three months ended March 31, 2009, December 31, 2008 and March 31, 2008. Management believes field operating income is a useful measure of operating results since the measure only deducts expenses directly related to operations from revenues. The most directly comparable GAAP financial measure, operating income before general and administrative expenses, and information reconciling the GAAP and non-GAAP measures are included in the press release.

Item 7.01. Regulation FD Disclosure.

Slide Presentation

On May 6, 2009, we are posting the slide presentation furnished as Exhibit 99.2 to this report on our website at www.deepwater.com. Exhibit 99.2 is incorporated in this Item 7.01 by reference.

Statements contained within the slide presentation that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include but are not limited to projections relating to out-of-service forecasts, operating and maintenance costs trends, contract backlog, and other statements that are not historical facts. Such statements are subject to numerous risks, uncertainties and assumptions, including but not limited to, uncertainties relating to the level of activity in offshore oil and gas exploration and development, exploration success by producers, oil and gas prices, rig demand and capacity, drilling industry market conditions, possible delays or cancellation of drilling contracts, work stoppages, operational or other downtime, the Company’s ability to enter into and the terms of future contracts, the availability of qualified personnel, labor relations, future financial results, operating hazards, political and other uncertainties inherent in non-U.S. operations (including exchange and currency fluctuations), war, terrorism, natural disaster and cancellation or unavailability of insurance coverage, the impact of governmental laws and regulations, the adequacy of sources of liquidity, the effect of litigation and contingencies and other factors discussed in the Company’s Form 10-K for the year ended December 31, 2008, and in the Company’s other filings with the Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC’s website at www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. We caution investors not to place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.

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Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

The exhibits to this report furnished pursuant to items 2.02, and 7.01 are as follows:

 

Exhibit No.		Description
99.1		Transocean Ltd. Release Reporting First Quarter 2009 Financial Results
99.2		Slide Presentation

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		TRANSOCEAN LTD.
Date: May 6, 2009		By		/s/    Chipman Earle
				Chipman Earle
				Associate General Counsel and Corporate Secretary

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Index to Exhibits

 

Exhibit Number		Description
99.1		Transocean Ltd. Release Reporting First Quarter 2009 Financial Results
99.2		Slide Presentation

Exhibit 99.1

 

Analyst Contact:		Gregory S. Panagos 713-232-7551
Media Contact:		Guy A. Cantwell 713-232-7647		News Release FOR RELEASE: May 6, 2009

TRANSOCEAN LTD. REPORTS

FIRST QUARTER 2009 FINANCIAL RESULTS

ZUG, SWITZERLAND—Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest for the three months ended March 31, 2009 of $942 million, or $2.93 per diluted share, compared to net income attributable to controlling interest of $1.149 billion, or $3.58 per diluted share for the three months ended March 31, 2008. Revenues for the first quarter of 2009 were $3.118 billion compared to $3.110 billion for the first quarter of 2008.

First quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $264 million, or $0.82 per diluted share, as follows:

 

•

$221 million of write-downs to fair market value for the GSF Arctic II and GSF Arctic IV semisubmersible rigs held for sale and

 

•

$43 million of discrete tax items, payments associated with the merger of Transocean and GlobalSantaFe Corporation and losses on the retirement of debt.

First quarter 2008 reported income included certain net charges, after-tax, totaling $30 million, or $0.09 per diluted share, consisting of $27 million in discrete tax items, $1 million in merger-related costs and a $2 million loss related to the retirement of debt.

Operations Quarterly Review

Revenues for the three months ended March 31, 2009 decreased 4.6 percent to $3.118 billion compared to revenues of $3.270 billion during the three months ended December 31, 2008. Of the $152 million quarter-to-quarter decrease, $127 million reflected a decline in integrated services and other revenue and $29 million resulted from reduced contract drilling intangible revenues.

Operating and maintenance expenses for the three months ended March 31, 2009 were $1.171 billion compared to $1.408 billion for the prior three-month period, a decrease of $237 million or 16.8 percent. The quarter-to-quarter decline in operating and maintenance costs consisted of $92 million from reduced non-drilling activity, $77 million related to a reduction in shipyard and maintenance projects and the remainder related to reductions in a variety of items including bad debt expense, strengthening of the U.S. dollar and decreases in drilling activity.

Depreciation, depletion and amortization totaled $355 million in the first quarter of 2009, a decrease of 10.4 percent compared to $396 million in the fourth quarter of 2008. The $41 million quarter-to-quarter decrease resulted primarily from the cumulative effect of various adjustments related to the merger with GlobalSantaFe made during fourth quarter 2008 that did not recur in the first quarter 2009.

General and administrative expenses decreased 5.1 percent to $56 million for the first quarter of 2009 compared to $59 million for the fourth quarter 2008. The decrease primarily reflects a reduction in costs related to the company’s move to Switzerland incurred in the first quarter of 2009 compared to the fourth quarter 2008.

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Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the first quarter of 2009 totaled $136 million compared to $167 million for the fourth quarter of 2008. The decrease in interest expense included $16 million from increased capitalized interest and $11 million from lower interest rates and lower balances in our commercial paper program.

During the first quarter 2009, Transocean adopted Financial Accounting Standards Board Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”), which requires the company to separately account for the liability and equity components of its convertible debt instruments and to reflect interest expense at its market rate of borrowing. For the first quarter 2009, interest expense, net of amounts capitalized, included a non-cash increase of approximately $45 million resulting from the adoption of FSP APB 14-1. For the full year 2009, interest expense, net of amounts capitalized, is expected to include a non-cash increase of $176 million resulting from the adoption of FSP APB 14-1.

First quarter 2008 results are presented as adjusted for the retrospective application of FSP APB 14-1. For the first quarter 2008, interest expense, net of amounts capitalized, included a non-cash increase of $40 million resulting from the retrospective application of FSP APB 14-1. For the full year 2008, retrospective application of FSP APB 14-1 will result in a non-cash increase to interest expense, net of amounts capitalized, of $171 million. Additionally, the retrospective application of FSP APB 14-1 to our balance sheet as of March 31, 2008 caused our total assets to decrease by $5 million, our liabilities to decrease by $776 million and our equity to increase by $771 million.

As of March 31, 2009, total debt was $12.964 billon, compared to total debt of $13.557 billion as of December 31, 2008 (as adjusted for FSP APB 14-1). The decrease in total debt of $593 million during the first quarter 2009 resulted primarily from debt repayments, partially offset by additional borrowings under our joint venture credit facilities and increased amortization of discounts and fair value adjustments. The retrospective application of FSP APB 14-1 to our balance sheet as of December 31, 2008 caused our total assets to increase by $11 million, our liabilities to decrease by $629 million and our equity to increase by $640 million.

Cash flow from operating activities totaled $1.441 billion for the first quarter of 2009 compared to $1.196 billion for the fourth quarter of 2008.

Effective Tax Rate

Transocean’s reported Effective Tax Rate⁽¹⁾ of 21.1 percent for the first quarter of 2009 reflects the unfavorable impact of the write-down of rigs to fair market value, as described above, as well as various discrete tax items of $36 million which primarily resulted from changes in estimates. Excluding these various discrete items, the Annual Effective Tax Rate⁽²⁾ for the first quarter of 2009 was 15.2 percent.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern time, 4:00 p.m. Swiss time, on May 6, 2009. To participate, dial 913-312-1522 and refer to confirmation code 1643292 approximately five to 10 minutes prior to the scheduled start time of the call.

In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto Transocean’s website at www.deepwater.com and selecting “Investor

 

 

(1)	Effective Tax Rate is defined as income tax expense divided by income before income taxes. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

(2)

Annual Effective Tax Rate is defined as income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

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Relations/News & Events/Webcasts & Presentations.” A file containing five charts to be discussed during the conference call, titled “1Q09 Charts,” has been posted to Transocean’s website and can also be found by selecting “Investor Relations/News & Events/Webcasts & Presentations.” The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean’s New York Stock Exchange trading symbol, “RIG.”

A telephonic replay of the conference call should be available after 1:00 p.m. Eastern time, 7:00 p.m. Swiss time, on May 6, 2009 and can be accessed by dialing 719-457-0820 and referring to the passcode 1643292. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.

Transocean is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 136 mobile offshore drilling units plus 10 announced ultra-deepwater newbuild units, Transocean’s fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. Transocean owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 28 Midwater Floaters, 10 High-Specification Jackups, 55 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

 

###		09-12

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

		Three months ended March 31,
		2009				2008
						(As adjusted)
Operating revenues
Contract drilling revenues		$	2,834			$	2,632
Contract drilling intangible revenues			104				224
Other revenues			180				254
			3,118				3,110
Costs and expenses
Operating and maintenance			1,171				1,157
Depreciation, depletion and amortization			355				367
General and administrative			56				49
			1,582				1,573
Impairment loss			(221	)			—
Gain from disposal of assets, net			4				3
Operating income			1,319				1,540
Other income (expense), net
Interest income			1				13
Interest expense, net of amounts capitalized			(136	)			(177	)
Other, net			6				(8	)
			(129	)			(172	)
Income before income taxes			1,190				1,368
Income tax expense			251				218
Net income			939				1,150
Net income (loss) attributable to noncontrolling interest			(3	)			1
Net income attributable to controlling interest		$	942			$	1,149
Earnings per share
Basic		$	2.94			$	3.62
Diluted		$	2.93			$	3.58
Weighted average shares outstanding
Basic			319				317
Diluted			320				321

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

 

		March 31, 2009				December 31, 2008
						(As adjusted)
ASSETS
Cash and cash equivalents		$	1,302			$	963
Short-term investments			112				333
Accounts receivable, net of allowance for doubtful accounts of $115 and $114 at March 31, 2009 and December 31, 2008, respectively			2,884				2,864
Materials and supplies, net of allowance for obsolescence of $54 and $49 at March 31, 2009 and December 31, 2008, respectively			458				432
Deferred income taxes, net			50				63
Assets held for sale			244				464
Other current assets			165				230
Total current assets			5,215				5,349
Property and equipment			26,373				25,836
Less accumulated depreciation			5,319				4,975
Property and equipment, net			21,054				20,861
Goodwill			8,134				8,128
Other assets			856				844
Total assets		$	35,259			$	35,182
LIABILITIES AND EQUITY
Accounts payable		$	745			$	914
Accrued income taxes			299				317
Debt due within one year			2,040				664
Other current liabilities			705				806
Total current liabilities			3,789				2,701
Long-term debt			10,924				12,893
Deferred income taxes, net			673				666
Other long-term liabilities			1,753				1,755
Total long-term liabilities			13,350				15,314
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947 authorized, 167,617,649 contingently authorized, 335,235,298 issued and 320,004,924 outstanding at March 31, 2009 and 502,852,947 authorized, 167,617,649 contingently authorized, 335,235,298 issued and 319,262,113 outstanding at December 31, 2008			4,455				4,444
Additional paid-in capital			7,344				7,313
Accumulated other comprehensive loss			(448	)			(420	)
Retained earnings			6,769				5,827
Total controlling interest shareholders’ equity			18,120				17,164
Noncontrolling interest			—				3
Total equity			18,120				17,167
Total liabilities and equity		$	35,259			$	35,182

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TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Three months ended March 31,
		2009				2008
						(As adjusted)
Cash flows from operating activities
Net income		$	939			$	1,150
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of drilling contract intangibles			(104	)			(224	)
Depreciation, depletion and amortization			355				367
Share-based compensation expense			19				22
Gain from disposal of assets, net			(4	)			(3	)
Impairment loss			221				—
Amortization of debt issue costs, discounts and premiums, net			52				41
Deferred revenue, net			(6	)			18
Deferred expenses, net			2				16
Deferred income taxes			6				(25	)
Other, net			11				1
Changes in operating assets and liabilities			(50	)			119
Net cash provided by operating activities			1,441				1,482
Cash flows from investing activities
Capital expenditures			(708	)			(769	)
Proceeds from disposal of assets, net			8				254
Proceeds from distributions from short-term investments			221				—
Joint ventures and other investments, net			—				(3	)
Net cash used in investing activities			(479	)			(518	)
Cash flows from financing activities
Change in short-term borrowings, net			(24	)			(4	)
Proceeds from debt			88				1,976
Repayments of debt			(600	)			(2,633	)
Payments for repurchase of convertible senior notes			(102	)			—
Payments for exercise of warrants, net			—				(4	)
Proceeds from share-based compensation plans, net			17				27
Other, net			(2	)			—
Net cash used in financing activities			(623	)			(638	)
Net increase in cash and cash equivalents			339				326
Cash and cash equivalents at beginning of period			963				1,241
Cash and cash equivalents at end of period		$	1,302			$	1,567

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TRANSOCEAN LTD.

FLEET OPERATING STATISTICS

 

		Operating Revenues ($ Millions) (1)
		Three months ended
		March 31, 2009				December 31, 2008				March 31, 2008
Contract Drilling Revenues
High-Specification Floaters:
Ultra-Deepwater Floaters		$	702			$	673			$	608
Deepwater Floaters			413				331				325
Harsh Environment Floaters			158				164				150
Total High-Specification Floaters			1,273				1,168				1,083
Midwater Floaters			708				797				675
High-Specification Jackups			151				146				157
Standard Jackups			689				709				711
Other Rigs			13				10				6
Subtotal			2,834				2,830				2,632
Contract Intangible Revenue			104				133				224
Other Revenues
Client Reimbursable Revenues			50				51				48
Integrated Services and Other			53				49				43
Drilling Management Services			70				194				139
Oil and Gas Properties			7				13				24
Subtotal			180				307				254
Total Company		$	3,118			$	3,270			$	3,110
		Average Dayrates (1)
		Three months ended
		March 31, 2009				December 31, 2008				March 31, 2008
High-Specification Floaters:
Ultra-Deepwater Floaters		$	451,000			$	423,600			$	380,800
Deepwater Floaters		$	336,900			$	299,000			$	284,100
Harsh Environment Floaters		$	351,100			$	358,900			$	344,000
Total High-Specification Floaters		$	393,800			$	370,500			$	340,900
Midwater Floaters		$	314,700			$	329,200			$	292,300
High-Specification Jackups		$	169,500			$	169,100			$	173,800
Standard Jackups		$	156,400			$	156,100			$	146,200
Other Rigs		$	46,700			$	37,800			$	21,200
Total Drilling Fleet		$	256,500			$	251,500			$	228,400
		Utilization (1)
		Three Months Ended
		March 31, 2009				December 31, 2008				March 31, 2008
High-Specification Floaters:
Ultra-Deepwater Floaters			96	%			96	%			98	%
Deepwater Floaters			85	%			75	%			79	%
Harsh Environment Floaters			100	%			100	%			96	%
Total High-Specification Floaters			92	%			88	%			90	%
Midwater Floaters			89	%			92	%			88	%
High-Specification Jackups			99	%			94	%			99	%
Standard Jackups			89	%			90	%			93	%
Other Rigs			99	%			99	%			100	%
Total Drilling Fleet			91	%			90	%			91	%

 

(1)

Average daily revenue is defined as contract drilling revenue earned per revenue earning day in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement of operations. Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in our fleet.

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Transocean Ltd. and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Operating Income Before General and Administrative Expense

to Field Operating Income

(In millions)

 

		Three months ended
		Mar. 31, 2009			Dec. 31, 2008			Mar. 31, 2008
Operating revenue		$	3,118		$	3,270		$	3,110
Operating and maintenance expense			1,171			1,408			1,157
Depreciation, depletion and amortization			355			396			367
Impairment loss			221			320			—
(Gain) loss from disposal of assets, net			4			3			(3	)
Operating income before general and administrative expense			1,367			1,143			1,589
Add back (subtract):
Depreciation, depletion and amortization			355			396			367
Impairment loss			221			320			—
(Gain) loss from disposal of assets, net			4			3			(3	)
Field operating income		$	1,947		$	1,862		$	1,953

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Transocean Ltd. and Subsidiaries

Supplemental Effective Tax Rate Analysis

(In millions)

 

		Three months ended
		Mar. 31, 2009				Dec. 31, 2008				Mar. 31, 2008
						(As adjusted)
Income before income taxes		$	1,190			$	963			$	1,368
Add back (subtract):
Impairment loss			221				326				—
Change to estimated useful lives of certain GSF rigs			—				46				—
Sedco 712 bad debt provision			—				23				—
Inventory obsolescence provision			—				21				—
GSF Merger related costs			6				2				—
Contract termination fee - Transocean Nordic			—				(17	)			—
Income from TODCO tax sharing agreement			—				(4	)			—
Loss on retirement of debt			2				—				—
Adjusted income before income taxes			1,419				1,360				1,368
Income tax expense			251				210				218
Add back (subtract):
GSF Merger related costs			1				—				—
Impairment loss			—				17				—
Sedco 712 bad debt provision			—				6				—
Materials and supplies obsolescence provision			—				3				—
Changes in estimates (1)			(37	)			(14	)			(27	)
Adjusted income tax expense (2)		$	215			$	222			$	191
Effective Tax Rate (3)			21.1	%			21.8	%			15.9	%
Annual Effective Tax Rate (4)			15.2	%			16.3	%			14.0	%

 

(1)	Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in deferred taxes valuation allowances on deferred taxes and other tax liabilities.

(2)	The three months ended Dec. 31, 2008 include $28 million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate.

(3)	Effective Tax Rate is income tax expense divided by income before income taxes.

(4)

Annual Effective Tax Rate is income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18.

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