Transocean Raises Revenue Outlook as Utilization Weighs on Results
Liquidity climbed above $1.3 billion as cash generation strengthened during the quarter.
Transocean Ltd. (RIG), the offshore drilling contractor, reported a 10.6% sequential decline in contract-drilling revenue to $966 million as fleet utilization weakened.
The quarter paired a near-term slowdown in rig activity with a higher full-year revenue forecast. Fleet utilization dropped to 78.2% from 86.7% in the preceding quarter, though it remained above the year-earlier level of 67.3%.
Revenue was 2.2% lower than a year earlier. Adjusted EBITDA fell to $312 million from $440 million sequentially, compressing the margin to 32.2% from 40.7%. Net income rose to $170 million from $71 million in the prior quarter and swung from a $938 million year-earlier loss that included a $1.136 billion impairment charge.
Ultra-deepwater operations accounted for the revenue decline, with segment revenue falling $125 million sequentially to $623 million as utilization dropped to 72.6% from 82.1%. Harsh-environment revenue rose $10 million to $343 million despite utilization easing to 94.2% from 100%. Harsh-environment average daily revenue increased to $510,000 from $463,800, while the ultra-deepwater rate fell to $455,500 from $480,700.
New firm awards added $292 million of backlog at a weighted-average dayrate of about $461,000, compared with $1.6 billion of additions at roughly $410,000 a day in the preceding quarterly report. Total reported backlog declined to about $6.7 billion from $7.1 billion.
Transocean raised its full-year contract-drilling revenue forecast to between $3.900 billion and $3.975 billion from $3.800 billion to $3.900 billion. The company also lifted its operating-and-maintenance expense outlook, while cutting projected interest expense by $135 million to $475 million. Third-quarter contract-drilling revenue is expected to range from $920 million to $960 million, implying another sequential decline.
Operating cash flow increased to $236 million from $164 million sequentially, and free cash flow rose to $212 million from $136 million. Quarter-end debt principal declined to $5.107 billion, helping reduce net debt-to-adjusted EBITDA to 2.8 times from 4.7 times a year earlier. A conditional Equinor agreement covering three harsh-environment rigs could add about $1.0 billion over seven rig-years once license-partner approvals are secured.