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 7, 2008 (May 7, 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 May 7, 2008, concerning first 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 March 31, 2008, December 31, 2007 and March 31, 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 May 7, 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 First 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: May 7, 2008				By		/s/ Eric B. Brown
						Eric B. Brown Senior Vice President and General Counsel

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Index to Exhibits

 

Exhibit Number		Description
99.1		Transocean Inc. Release Reporting First Quarter 2008 Financial Results
99.2		Slide Presentation

Exhibit 99.1

 

				Transocean Inc. Post Office Box 2765 Houston TX 77252 2765

 

Analyst Contact:		Gregory S. Panagos
		713-232-7551
Media Contact:		Guy A. Cantwell		News Release
		713-232-7647		FOR RELEASE: May 7, 2008

TRANSOCEAN INC. REPORTS

FIRST QUARTER 2008 FINANCIAL RESULTS

HOUSTON—Transocean Inc. (NYSE: RIG) today reported net income for the three months ended March 31, 2008 of $1,189 million, or $3.71 per diluted share, compared to net income of $553 million, or $2.62 per diluted share for the three months ended March 31, 2007. Revenues for the first quarter of 2008 were $3,110 million compared to $1,328 million for the first quarter of 2007.

On November 27, 2007, Transocean Inc. merged with GlobalSantaFe Corporation (the “Merger”) and reclassified its ordinary shares into cash and shares (the “Reclassification”). Reported results for the first quarter of 2008 include a full three months from GlobalSantaFe’s operations. Diluted earnings per share for the first quarter of 2007 excludes GlobalSantaFe’s operations and is based on a weighted average diluted share count of 212 million shares, which includes the effect of restating the historical diluted share count for the Reclassification. Results for the fourth quarter of 2007 include approximately one month of GlobalSantaFe’s operations.

First quarter 2008 results included after-tax charges of $30 million, or $0.09 per diluted share, related to $27 million for discrete tax items, $1 million for Merger-related costs and a $2 million loss resulting from the retirement of debt. Net income for the quarter ended March 31, 2007 included after-tax gains of $22 million, or $0.10 per diluted share, resulting from the sale of a tender-assist rig and a tax benefit on discrete items.

Operations Quarterly Review

Revenues for the three months ended March 31, 2008 increased 49.7 percent to $3,110 million compared to revenues of $2,077 million during the three months ended December 31, 2007. Of the $1,033 million quarter-to-quarter increase, $919 million reflected the addition of a full quarter of GlobalSantaFe revenues, including an increase of $136 million in non-cash contract intangible revenue. The remaining increase was primarily due to a higher average dayrate for the Transocean fleet as well as a decrease in shipyards and maintenance time. The increase in average dayrate was experienced across all rig categories, primarily as a result of rigs commencing new contracts at the higher prevailing current dayrates. First quarter of 2008 results benefited from the postponement of several shipyard projects to later in the year.

Operating and maintenance expenses for the three months ended March 31, 2008 were $1,157 million compared to $923 million for the prior three-month period, an increase of $234 million or 25.4 percent. The addition of GlobalSantaFe’s operations accounted for an increase of $332 million, which was partially offset by a decrease in costs for shipyards and major maintenance projects. Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year.

Depreciation, depletion and amortization increased to $367 million in the first quarter of 2008, an increase of 88.2 percent compared to $195 million in the fourth quarter of 2007. Property and equipment and certain intangible assets acquired in the Merger accounted for the majority of this increase.

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General and administrative expenses decreased 18.3 percent to $49 million in the first quarter of 2008 compared to $60 million in the prior three-month period. The decrease primarily reflects a reduction in Merger-related compensation costs compared to the fourth quarter of 2007.

Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the first quarter of 2008 increased to $137 million compared to $79 million for the fourth quarter of 2007. The increase primarily resulted from interest on the borrowings incurred in conjunction with the Merger and Reclassification.

Cash flow from operating activities totaled $1,482 million for the first quarter of 2008 compared to $915 million for the fourth quarter of 2007. As of March 31, 2008, total debt was $16.6 billion, down $0.7 billion from $17.3 billion as of December 31, 2007.

Effective Tax Rate

The reported Effective Tax Rate⁽¹⁾ of 15.5 percent for the first quarter of 2008 reflects the unfavorable impact of various discrete tax items of $27 million resulting from changes in estimates. Excluding these various discrete tax items, the Annual Effective Tax Rate⁽²⁾ for the first quarter of 2008 was 13.5 percent.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern Time on May 7, 2008. To participate, dial 913-312-0968 and refer to confirmation code 9574214 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 “1Q08 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 May 7, 2008 and can be accessed by dialing 719-457-0820 and referring to the passcode 9574214. 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 138 mobile offshore drilling units plus nine 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, 56 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

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08–  

 

(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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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

 

		Three months ended March 31,
		2008				2007
Operating revenues
Contract drilling revenues		$	2,640			$	1,273
Contract intangible revenues			224				—
Other revenues			246				55
			3,110				1,328
Costs and expenses
Operating and maintenance			1,157				568
Depreciation, depletion and amortization			367				100
General and administrative			49				26
			1,573				694
Gain from disposal of assets, net			3				23
Operating income			1,540				657
Other income (expense), net
Interest income			13				5
Interest expense, net of amounts capitalized			(137	)			(37	)
Other, net			(8	)			13
			(132	)			(19	)
Income before income taxes and minority interest			1,408				638
Income tax expense			218				85
Minority interest			1				—
Net income		$	1,189			$	553
Earnings per share
Basic		$	3.75			$	2.72
Diluted		$	3.71			$	2.62
Weighted average shares outstanding
Basic			317				203
Diluted			321				212

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

 

		March 31, 2008				December 31, 2007
		(Unaudited)
ASSETS
Cash and cash equivalents		$	1,567			$	1,241
Accounts receivable, net of allowance for doubtful accounts of $61 and $50 at March 31, 2008 and December 31, 2007, respectively			2,357				2,370
Materials and supplies, net of allowance for obsolescence of $20 and $22 at March 31, 2008 and December 31, 2007, respectively			367				333
Deferred income taxes, net			96				119
Assets held for sale			666				—
Other current assets			177				233
Total current assets			5,230				4,296
Property and equipment			24,237				24,545
Less accumulated depreciation			3,949				3,615
Property and equipment, net			20,288				20,930
Goodwill			8,424				8,219
Other assets			920				919
Total assets		$	34,862			$	34,364
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable		$	722			$	805
Accrued income taxes			238				99
Debt due within one year			3,356				6,172
Other current liabilities			772				826
Total current liabilities			5,088				7,902
Long-term debt			13,239				11,085
Deferred income taxes, net			814				681
Other long-term liabilities			1,928				2,125
Total long-term liabilities			15,981				13,891
Commitments and contingencies
Minority interest			6				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, 318,217,122 and 317,222,909 shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively			3				3
Additional paid-in capital			10,853				10,799
Accumulated other comprehensive loss			(64	)			(42	)
Retained earnings			2,995				1,806
Total shareholders’ equity			13,787				12,566
Total liabilities and shareholders’ equity		$	34,862			$	34,364

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TRANSOCEAN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

		Three months ended March 31,
		2008				2007
Cash flows from operating activities
Net income		$	1,189			$	553
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of drilling contract intangibles			(224	)			—
Depreciation, depletion and amortization			367				100
Share-based compensation expense			22				10
Gain from disposal of assets, net			(3	)			(23	)
Deferred revenue, net			18				34
Deferred expenses, net			16				(7	)
Deferred income taxes			(25	)			(2	)
Other, net			(12	)			(1	)
Changes in operating assets and liabilities			134				(10	)
Net cash provided by operating activities			1,482				654
Cash flows from investing activities
Capital expenditures			(769	)			(465	)
Proceeds from disposal of assets, net			254				39
Joint ventures and other investments, net			(3	)			(3	)
Net cash used in investing activities			(518	)			(429	)
Cash flows from financing activities
Borrowings under commercial paper program, net			1,316				—
Borrowings under Five-Year Revolving Credit Facility			180				—
Repayments under 364-Day Revolving Credit Facility			(1,500	)			—
Proceeds from debt			1,976				190
Repayments of debt			(2,633	)			—
Financing costs			(3	)			—
Payments made upon exercise of warrants, net			(4	)			—
Proceeds from issuance of ordinary shares under share-based compensation plans, net			27				15
Repurchase of ordinary shares			—				(400	)
Other, net			3				5
Net cash used in financing activities			(638	)			(190	)
Net increase in cash and cash equivalents			326				35
Cash and cash equivalents at beginning of period			1,241				467
Cash and cash equivalents at end of period		$	1,567			$	502

 

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Transocean Inc.

Fleet Operating Statistics

 

		Operating Revenues ($ Millions) (1) Three months ended
		March 31, 2008				December 31, 2007				March 31, 2007
Contract Drilling Revenues
High-Specification Floaters:
Ultra Deepwater Floaters		$	608			$	453			$	340
Deepwater Floaters			325				290				260
Harsh Environment Floaters			150				120				85
Total High-Specification Floaters			1,083				863				685
Midwater Floaters			675				534				379
High-Specification Jackups			157				64				12
Standard Jackups			711				386				182
Other Rigs			14				13				15
Subtotal			2,640				1,860				1,273
Contract Intangible Revenue			224				88				0
Other Revenues
Client Reimbursable Revenues			47				32				30
Integrated Services and Other			36				52				25
Drilling Management Services			139				36				0
Oil and Gas Properties			24				9				0
Subtotal			246				129				55
Total Company		$	3,110			$	2,077			$	1,328
		Average Dayrates (1) Three months ended
		March 31, 2008				December 31, 2007				March 31, 2007
High-Specification Floaters:
Ultra Deepwater Floaters		$	380,800			$	346,100			$	301,400
Deepwater Floaters		$	284,100			$	265,300			$	235,800
Harsh Environment Floaters		$	344,000			$	326,300			$	238,800
Total High-Specification Floaters		$	340,900			$	311,600			$	264,800
Midwater Floaters		$	292,300			$	274,600			$	223,700
High-Specification Jackups		$	173,800			$	173,400			$	133,400
Standard Jackups		$	146,200			$	130,800			$	103,200
Other Rigs		$	49,700			$	48,600			$	50,300
Total Drilling Fleet		$	229,000			$	224,000			$	198,000
		Utilization (1) Three Months Ended
		March 31, 2008				December 31, 2007				March 31, 2007
High-Specification Floaters:
Ultra Deepwater Floaters			98	%			97	%			97	%
Deepwater Floaters			79	%			75	%			77	%
Harsh Environment Floaters			96	%			80	%			99	%
Total High-Specification Floaters			90	%			85	%			87	%
Midwater Floaters			88	%			95	%			94	%
High-Specification Jackups			99	%			100	%			100	%
Standard Jackups			93	%			91	%			82	%
Other Rigs			100	%			97	%			100	%
Total Drilling Fleet			91	%			90	%			88	%

 

(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
		Mar 31, 2008				Dec 31, 2007				Mar 31, 2007
Operating revenue		$	3,110			$	2,077			$	1,328
Operating and maintenance expense			1,157				923				568
Depreciation, depletion and amortization			367				195				100
(Gain) loss from disposal of assets, net			(3	)			(254	)			(23	)
Operating income before general and administrative expense			1,589				1,213				683
Add back (subtract): Depreciation, depletion and amortization			367				195				100
(Gain) loss from disposal of assets, net			(3	)			(254	)			(23	)
Field operating income		$	1,953			$	1,154			$	760

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Transocean Inc. and Subsidiaries

Supplemental Effective Tax Rate Analysis

(In millions)

 

		Three months ended												Years ended Dec. 31,
		March 31, 2008				Dec. 31, 2007				March 31, 2007				2007				2006
Income (Loss) before income taxes and minority interest		$	1,408			$	1,079			$	638			$	3,384			$	1,607
Add back (subtract):
(Gain) loss on disposal of assets, net			—				(233	)			(23	)			(264	)			(410	)
Income from TODCO tax sharing agreement			—				(1	)			—				(277	)			(51	)
(Gain) loss on retirement of debt			2				8				—				8				—
GSF Merger related costs			1				82				—				82				—
Adjusted income before income taxes			1,411				935				615				2,933				1,146
Income tax expense			218				23				85				253				222
Add back (subtract):			—
(Gain) loss on disposal of assets, net			—				—				(3	)			(3	)			(24	)
GSF Merger related costs			—				15				—				15				—
Changes in estimates (1)			(27	)			36				2				101				14
Adjusted income tax expense (2)		$	191			$	74			$	84			$	366			$	212
Effective Tax Rate (3)			15.5	%			2.1	%			13.3	%			7.5	%			13.8	%
Annual Effective Tax Rate (4)			13.5	%			7.9	%			13.7	%			12.5	%			18.5	%

 

(1)

Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events impacting our liabilities for income taxes. Changes in estimates include changes in deferred taxes, valuation allowances on deferred taxes or other tax liabilities and the impact of changes in currency exchange rates.

(2)	The three months ended December 31, 2007 include $ (43) million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate and included $17 million related to customer identification that is also reflected as a reduction of revenue.

(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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