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Transocean's (RIG) Loss Meets Estimates in Q1, Revenues Lag

Transocean Ltd. RIG posted first-quarter 2020 adjusted loss of 30 cents a share, in line with the Zacks Consensus Estimate as well as the year-ago loss. Strong revenues from the Ultra-deepwater floaters along with increased dayrates led to this result, which was partially offset by a weak revenue contribution from the Harsh Environment floaters.

Meanwhile, this offshore drilling powerhouse generated total revenues of $759 million, missing the Zacks Consensus Estimate of $791 million due to ramped-down activity associated with rigs that were idle and lower revenue efficiency. But the top line improved 0.66% from the prior-year figure of $754 million.

Segmental Revenue Break-Up

Transocean’s Ultra-deepwater floaters contributed to 59.6% of total contract drilling revenues while Harsh Environment floaters and Midwater floaters accounted for the remainder. In the quarter under review, revenues from Ultra-deepwater and Harsh Environment floaters totalled $528 million and $220 million each, indicating a respective 10.9% improvement and a 14.7% drop from the year-ago reported figures of $476 million and $258 million, respectively.

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Revenue efficiency was 94.4%, marginally lower than the fourth-quarter 2019-level. The figure was also declined from the year-ago number.

Dayrates and Utilization

On an encouraging note, average dayrate in the quarter rose to $314,900 from the year-ago level of $306,500. The company witnessed year-over-year higher average revenues per day from Midwater floaters and Harsh environment floaters. Overall, fleet utilization was 60% during the quarter, up from the prior-year utilization rate of 56%.

Backlog

Transocean’s backlog record at $9.6 billion as of April reflects a decline of $2.5 billion from the year-ago figure. Since its last fleet status update in October 2019, the company has been successful in securing $10 million worth additional contracts, courtesy of new deals and extensions of its existing projects.

Transocean Ltd Price, Consensus and EPS Surprise

Transocean Ltd Price, Consensus and EPS Surprise
Transocean Ltd Price, Consensus and EPS Surprise

Transocean Ltd price-consensus-eps-surprise-chart | Transocean Ltd Quote

Costs, Capex & Balance Sheet

Operating and maintenance costs increased to $540 million from $508 million a year ago. The company spent $107 million on capital expenditure in the first quarter. Cash provided by operating activities totalled $48 million. The company had cash and cash equivalents worth $1.48 billion on Mar 31, 2020. Long-term debt was $8.57 billion with debt-to-capitalization of 42.8% as of the same date.

Guidance

For the second quarter, the company expects adjusted contract drilling revenues to be $785 million while for the full year, it estimates the same to be $3 billion. Meanwhile, capital expenses for 2020 are anticipated to be $857 million.

Second-quarter operating and maintenance expense is projected to be approximately $545 million whereas for the full year, the same is anticipated to be $2 billion.  Further, the company projects its G&A expense for the current quarter and the full year to be approximately $44 million and $175 million, respectively.

Meanwhile, capital spending comprising capitalized interest for the second quarter is predicted to be almost $55 million.For the ongoing year, the company estimates capital expenditure to be around $840 million, consisting of roughly $740 million for the two newbuild drillships and the remaining $100 million for maintenance. 

Zacks Rank & Key Picks

Transocean has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are CNX Resources Corp. CNX, Cheniere Energy, Inc. LNG and Cabot Oil Gas Corp. COG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Transocean Ltd (RIG) : Free Stock Analysis Report
 
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