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): August 6, 2008 (August 6, 2008)

TRANSOCEAN INC.

(Exact name of registrant as specified in its charter)

 

Cayman Islands		333-75899		66-0582307
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

4 Greenway Plaza Houston, Texas		77046
(Address of principal executive offices)		(zip code)
70 Harbour Drive Grand Cayman, Cayman Islands		KY1-1003
(Address of principal executive offices)		(zip code)

Registrant’s telephone number, including area code: (713) 232-7500

(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 August 6, 2008, concerning second quarter 2008 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 June 30, 2008, March 31, 2008 and June 30, 2007 and the six months ended June 30, 2008 and June 30, 2007. 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 August 6, 2008, 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, 2007, 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 Inc. Release Reporting Second Quarter 2008 Financial Results
99.2		Slide Presentation

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 INC.
Date: August 6, 2008				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 Inc. Release Reporting Second Quarter 2008 Financial Results
99.2		Slide Presentation

EXHIBIT 99.1

 

Analyst Contact:		Gregory S. Panagos 713-232-7551		News Release
Media Contact:		Guy A. Cantwell 713-232-7647		FOR RELEASE: August 6, 2008

TRANSOCEAN INC. REPORTS

SECOND QUARTER 2008 FINANCIAL RESULTS

HOUSTON – Transocean Inc. (NYSE: RIG) today reported net income for the three months ended June 30, 2008 of $1.107 billion, or $3.45 per diluted share, compared to net income of $549 million, or $2.63 per diluted share for the three months ended June 30, 2007. Revenues for the second quarter of 2008 were $3.102 billion compared to $1.434 billion for the second quarter of 2007.

For the six months ended June 30, 2008, net income totaled $2.296 billion, or $7.15 per diluted share, on revenues of $6.212 billion. For the same period last year, net income totaled $1.102 billion, or $5.24 per diluted share, on revenues of $2.762 billion. Net income for the first half of 2008 included after-tax charges of $31 million, or $0.10 per diluted share, resulting primarily from $25 million of discrete tax items, $3 million of merger-related costs and a $3 million loss from the early retirement of debt. For the same period last year, net income included after-tax gains of $33 million, or $0.15 per diluted share, resulting primarily from a $20 million gain on the sale of the tender rig Charley Graves and $13 million of discrete tax items during the first quarter 2007.

On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation and reclassified its ordinary shares into cash and shares (the “Reclassification”). Reported results for the second quarter and first half of 2008 include a full three and six months, respectively, from GlobalSantaFe’s operations. Diluted earnings per share for the second quarter and first half of 2007 exclude GlobalSantaFe’s operations and are based on a weighted average diluted share count of 210 million and 211 million shares, respectively, which includes the effect of restating the historical diluted share count for the Reclassification.

Operations Quarterly Review

Revenues for the three months ended June 30, 2008 were $3.102 billion compared to revenues of $3.110 billion during the three months ended March 31, 2008. The $8 million quarter-to-quarter decrease in total revenues included $53 million of lower contract drilling revenues reflecting an increase in out-of-service time for planned shipyards, which were partially offset by an increase in average dayrates, and $34 million of lower non-cash contract drilling intangible revenues. These net declines were offset by a $79 million increase in other revenues, primarily from non-drilling activities. The average dayrate for the fleet increased four percent from $229,000 in the first quarter to $238,600 in the second quarter, primarily as a result of rigs commencing new contracts at higher dayrates in the second quarter.

Operating and maintenance expenses for the three months ended June 30, 2008 were $1.364 billion compared to $1.157 billion for the prior three-month period. The $207 million increase in operating and maintenance expenses primarily reflects an increase in shipyard and maintenance projects as previously anticipated and scheduled pay increases.

Depreciation, depletion and amortization totaled $337 million in the second quarter of 2008, a decline of 8.2 percent compared to $367 million in the first quarter of 2008. The quarter-to-quarter decrease in depreciation, depletion and amortization is related to recently sold rigs and rigs classified as held for sale.

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General and administrative expenses decreased 8.2 percent to $45 million in the second quarter of 2008 compared to $49 million in the prior three-month period. The decrease primarily reflects a reduction in merger-related compensation costs relative to the first quarter of 2008.

Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the second quarter of 2008 decreased to $111 million compared to $137 million for the first quarter of 2008. The decrease resulted primarily from a quarter-to-quarter reduction in total debt of approximately $1.316 billion. As of June 30, 2008, total debt was $15.279 billion compared to $16.6 billion as of March 31, 2008.

Cash flow from operating activities totaled $1.011 billion for the second quarter of 2008 compared to $1.482 billion for the first quarter of 2008. Lower quarter-to-quarter cash flow during the second quarter of 2008 primarily reflects an increase in working capital and deferred expenses, as well as lower net income.

Effective Tax Rate

The Annual Effective Tax Rate⁽¹⁾ for the second quarter and first half of 2008 was 11.4 percent and 12.5 percent, respectively. The Effective Tax Rate⁽²⁾ for the first half of 2008 was 13.5 percent, which reflects the impact of various discrete tax items totaling $25 million, primarily related to changes in estimates. The Effective Tax Rate⁽²⁾ for the second quarter of 2008 was 11.2 percent.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern Time on August 6, 2008. To participate, dial 913-312-1439 and refer to confirmation code 2830174 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 the company’s website at www.deepwater.com and selecting “Investor Relations/News & Events/Webcasts & Presentations.” A file containing four charts to be discussed during the conference call, titled “2Q08 Charts,” has been posted to the company’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 the company’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 on August 6, 2008 and can be accessed by dialing 719-457-0820 and referring to the passcode 2830174. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses.

Transocean Inc. is the world’s largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 137 mobile offshore drilling units plus 10 announced ultra-deepwater newbuild units, the company’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. The company owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 29 Midwater Floaters, 10 High-Specification Jackups, 55 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

 

(1)

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.”

(2)	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.”

 

		###		08-38

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
Operating revenues
Contract drilling revenues		$	2,587			$	1,360			$	5,227			$	2,633
Contract drilling intangible revenues			190				—				414				—
Other revenues			325				74				571				129
			3,102				1,434				6,212				2,762
Costs and expenses
Operating and maintenance			1,364				627				2,521				1,195
Depreciation, depletion and amortization			337				101				704				201
General and administrative			45				29				94				55
			1,746				757				3,319				1,451
Gain (loss) from disposal of assets, net			(6	)			(1	)			(3	)			22
Operating income			1,350				676				2,890				1,333
Other income (expense), net
Interest income			10				5				23				10
Interest expense, net of amounts capitalized			(111	)			(33	)			(248	)			(70	)
Other, net			(3	)			(5	)			(11	)			8
			(104	)			(33	)			(236	)			(52	)
Income before income taxes and minority interest			1,246				643				2,654				1,281
Income tax expense			140				93				358				178
Minority interest			(1	)			1				—				1
Net income		$	1,107			$	549			$	2,296			$	1,102
Earnings per share
Basic		$	3.48			$	2.73			$	7.22			$	5.45
Diluted		$	3.45			$	2.63			$	7.15			$	5.24
Weighted average shares outstanding
Basic			318				202				318				202
Diluted			321				210				321				211

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

		June 30, 2008				December 31, 2007
		(Unaudited)
ASSETS
Cash and cash equivalents		$	976			$	1,241
Accounts receivable, net of allowance for doubtful accounts of $62 and $50 at June 30, 2008 and December 31, 2007, respectively			2,478				2,370
Materials and supplies, net of allowance for obsolescence of $23 and $22 at June 30, 2008 and December 31, 2007, respectively			414				333
Deferred income taxes, net			84				119
Assets held for sale			567				—
Other current assets			212				233
Total current assets			4,731				4,296
Property and equipment			24,661				24,545
Less accumulated depreciation			4,277				3,615
Property and equipment, net			20,384				20,930
Goodwill			8,351				8,219
Other assets			1,011				919
Total assets		$	34,477			$	34,364
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable		$	861			$	805
Accrued income taxes			182				99
Debt due within one year			2,145				6,172
Other current liabilities			732				826
Total current liabilities			3,920				7,902
Long-term debt			13,134				11,085
Deferred income taxes, net			734				681
Other long-term liabilities			1,719				2,125
Total long-term liabilities			15,587				13,891
Commitments and contingencies
Minority interest			5				5
Preference shares, $0.10 par value; 50,000,000 shares authorized, none issued and outstanding			—				—
Ordinary shares, $0.01 par value; 800,000,000 shares authorized, 319,044,814 and 317,222,909 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively			3				3
Additional paid-in capital			10,907				10,799
Accumulated other comprehensive loss			(47	)			(42	)
Retained earnings			4,102				1,806
Total shareholders’ equity			14,965				12,566
Total liabilities and shareholders’ equity		$	34,477			$	34,364

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
Cash flows from operating activities
Net income		$	1,107			$	549			$	2,296			$	1,102
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of drilling contract intangibles			(190	)			—				(414	)			—
Depreciation, depletion and amortization			337				101				704				201
Share-based compensation expense			11				9				33				19
(Gain) loss from disposal of assets, net			6				1				3				(22	)
Deferred revenue, net			7				4				25				38
Deferred expenses, net			(145	)			(6	)			(129	)			(13	)
Deferred income taxes			(31	)			(5	)			(56	)			(7	)
Other, net			(6	)			5				(18	)			4
Changes in operating assets and liabilities			(85	)			(51	)			49				(61	)
Net cash provided by operating activities			1,011				607				2,493				1,261
Cash flows from investing activities
Capital expenditures			(420	)			(290	)			(1,189	)			(755	)
Proceeds from disposal of assets, net			93				2				347				41
Joint ventures and other investments, net			—				—				(3	)			(3	)
Net cash used in investing activities			(327	)			(288	)			(845	)			(717	)
Cash flows from financing activities
Borrowings (repayments) under commercial paper program, net			(171	)			—				1,145				—
Repayments under revolving credit facilities, net			(180	)			(190	)			(1,500	)			—
Proceeds from debt			75				—				2,051				—
Repayments of debt			(1,040	)			(230	)			(3,673	)			(230	)
Payments made upon exercise of warrants, net			—				—				(4	)			—
Proceeds from issuance of ordinary shares under share-based compensation plans, net			34				40				61				55
Repurchase of ordinary shares			—				—				—				(400	)
Tax benefit from issuance of ordinary shares under share-based compensation plans			8				4				11				9
Other, net			(1	)			—				(4	)			—
Net cash used in financing activities			(1,275	)			(376	)			(1,913	)			(566	)
Net decrease in cash and cash equivalents			(591	)			(57	)			(265	)			(22	)
Cash and cash equivalents at beginning of period			1,567				502				1,241				467
Cash and cash equivalents at end of period		$	976			$	445			$	976			$	445

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Transocean Inc.

Fleet Operating Statistics

 

		Operating Revenues ($ Millions) (1)
		Three months ended												Six months ended June 30,
		June 30, 2008				March 31, 2008				June 30, 2007				2008				2007
Contract Drilling Revenues
High-Specification Floaters:
Ultra Deepwater Floaters		$	558			$	608			$	336			$	1,166			$	676
Deepwater Floaters			377				325				256				702				498
Harsh Environment Floaters			168				150				126				318				236
Total High-Specification Floaters			1,103				1,083				718				2,186				1,410
Midwater Floaters			650				675				396				1,325				768
High-Specification Jackups			147				157				12				304				24
Standard Jackups			674				711				218				1,385				401
Other Rigs			13				14				16				27				30
Subtotal			2,587				2,640				1,360				5,227				2,633
Contract Intangible Revenue			190				224				0				414				0
Other Revenues
Client Reimbursable Revenues			51				47				29				98				59
Integrated Services and Other			48				(52	)			45				(4	)			70
Drilling Management Services			208				227				0				435				0
Oil and Gas Properties			18				24				0				42				0
Subtotal			325				246				74				571				129
Total Company		$	3,102			$	3,110			$	1,434			$	6,212			$	2,762
		Average Dayrates (1)
		Three months ended												Six months ended June 30,
		June 30, 2008				March 31, 2008				June 30, 2007				2008				2007
High-Specification Floaters:
Ultra Deepwater Floaters		$	390,400			$	380,800			$	288,900			$	385,300			$	295,100
Deepwater Floaters		$	317,400			$	284,100			$	212,600			$	301,100			$	215,800
Harsh Environment Floaters		$	379,400			$	344,000			$	288,500			$	361,900			$	267,300
Total High-Specification Floaters		$	360,500			$	340,900			$	256,100			$	350,500			$	257,200
Midwater Floaters		$	299,300			$	292,300			$	234,400			$	295,700			$	233,300
High-Specification Jackups		$	178,000			$	173,800			$	130,400			$	175,800			$	131,900
Standard Jackups		$	149,400			$	146,200			$	117,300			$	147,700			$	110,400
Other Rigs		$	48,400			$	49,700			$	57,200			$	49,000			$	53,700
Total Drilling Fleet		$	238,600			$	229,000			$	202,400			$	233,700			$	200,200
		Utilization (1)
		Three months ended												Six months ended June 30,
		June 30, 2008				March 31, 2008				June 30, 2007				2008				2007
High-Specification Floaters:
Ultra Deepwater Floaters			87	%			98	%			98	%			92	%			97	%
Deepwater Floaters			81	%			79	%			83	%			80	%			80	%
Harsh Environment Floaters			98	%			96	%			96	%			97	%			98	%
Total High-Specification Floaters			86	%			90	%			91	%			88	%			89	%
Midwater Floaters			82	%			88	%			98	%			85	%			96	%
High-Specification Jackups			91	%			99	%			100	%			95	%			100	%
Standard Jackups			89	%			93	%			85	%			91	%			84	%
Other Rigs			100	%			100	%			100	%			100	%			100	%
Total Drilling Fleet			87	%			91	%			91	%			89	%			90	%

 

(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 Inc. and Subsidiaries

Non-GAAP Financial Measures and Reconciliations

Operating Income Before General and Administrative Expense

to Field Operating Income

(in millions)

 

		Three months ended										Six months ended
		June 30, 2008			March 31, 2008				June 30, 2007			June 30, 2008			June 30, 2007
Operating revenue		$	3,102		$	3,110			$	1,434		$	6,212		$	2,762
Operating and maintenance expense			1,364			1,157				627			2,521			1,195
Depreciation, depletion and amortization			337			367				101			704			201
(Gain) loss from disposal of assets, net			6			(3	)			1			3			(22	)
Operating income before general and administrative expense			1,395			1,589				705			2,984			1,388
Add back (subtract):
Depreciation, depletion and amortization			337			367				101			704			201
(Gain) loss from disposal of assets, net			6			(3	)			1			3			(22	)
Field operating income		$	1,738		$	1,953			$	807		$	3,691		$	1,567

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Transocean Inc. and Subsidiaries

Supplemental Effective Tax Rate Analysis

(In millions)

 

		Three months ended												Six months ended								Years ended Dec. 31,
		June 30, 2008				March 31, 2008				June 30, 2007				June 30, 2008				June 30, 2007				2007				2006
Income (Loss) before income taxes and minority interest		$	1,246			$	1,408			$	643			$	2,654			$	1,281			$	3,384			$	1,607
Add back (subtract):
(Gain) loss on disposal of assets, net			—				—				1				—				(22	)			(264	)			(410	)
Income from TODCO tax sharing agreement			—				—				—				—				—				(277	)			(51	)
Loss on retirement of debt			1				2				—				3				—				8				—
GSF Merger related costs			3				1				—				4				—				82				—
Adjusted income before income taxes			1,250				1,411				644				2,661				1,259				2,933				1,146
Income tax expense			140				218				93				358				178				253				222
Add back (subtract):
(Gain) loss on disposal of assets, net			—				—				—				—				(3	)			(3	)			(24	)
GSF Merger related costs			—				—				—								—				15				—
Changes in estimates (1)			2				(27	)			11				(25	)			13				101				14
Adjusted income tax expense (2)		$	142			$	191			$	104			$	333			$	188			$	366			$	212
Effective Tax Rate (3)			11.2	%			15.5	%			14.4	%			13.5	%			13.9	%			7.5	%			13.8	%
Annual Effective Tax Rate (4)			11.4	%			13.5	%			16.1	%			12.5	%			14.9	%			12.5	%			18.5	%

 

(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 June 30, 2008 include $ (30) 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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