Transocean profit hit by impairments, rig grounding

Offshore driller Transocean posted lower profit and revenues for the third quarter 2016 compared to prior-year quarter impacted by asset impairments and restructuring charges as well as expenses related to the grounding of the Transocean Winner drilling rig. 

Transocean reported net income attributable to controlling interest of $229 million for the three months ended September 30, 2016. Third quarter 2016 results included net favorable items of $136 million including $110 million in gains on early debt retirements; $38 million in discrete tax benefits; and $3 million associated with a gain on rig sales.

These were partially offset by $11 million related to the loss on impairment of assets; and $4 million in restructuring charges primarily related to employee severance. After consideration of these net favorable items, third quarter 2016 adjusted net income was $93 million.

For comparison, in the three months ended September 30, 2015, the company reported a net income attributable to controlling interest of $321 million. Third quarter 2015 included net favorable items of $5 million. After consideration of these net favorable items, adjusted net income was $316 million.

The company’s revenues for the three months ended September 30, 2016, decreased $40 million sequentially to $903 million due primarily to reduced activity associated with rig retirements partly offset by higher revenue efficiency, and decreased year over year compared to revenues of  $1.6 billion.

The company’s average revenue efficiency was 100.7 percent, compared with 96.5 percent in the second quarter of 2016. Additionally, third quarter 2016 was favorably impacted by the full quarter’s contribution from the newbuild, ultra-deepwater drillship Deepwater Proteus. The floater started operations on its 10-year contract in May 2016.

Operating and maintenance expense was $404 million, down from $500 million in the previous quarter. The decrease was due largely to lower costs associated with stacked rigs and rig retirements, and lower personnel expense related to the company’s continuing cost management initiatives. These decreases were partly offset by $21 million related to the grounding, salvage, and preparation for recycling of the Transocean Winner rig.

General and administrative expense was $39 million, down from $42 million in the second quarter of 2016. The decrease was due primarily to lower share-based compensation expense.