Transocean Ltd. Q1 2010 Earnings Call Transcript

Transocean Ltd. Q1 2010 Earnings Call Transcript
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Transocean Ltd. (RIG)

Q1 2010 Earnings Call

May 6, 2010 10:00 AM ET

Executives

Greg Panagos - VP, IR and Communications

Steven Newman - CEO

Ricardo Rosa - SVP and CFO

Ihab Toma - SVP, Marketing and Planning

Terry Bonno - VP, Marketing

Analysts

Angie Sedita - UBS

Scott Gruber - Bernstein

Scott Burk - Oppenheimer

Mike Urban - Deutsche Bank

Rob MacKenzie - FBR Capital Markets

Lee Cooperman - Omega Advisors

Roger Read - Natixis Bleichroeder

Ian MacPherson - Simmons

Geoff Kieburtz - Weeden & Company

Pierre Conner - Capital One Southcoast

Jason Mandel - Chapdelaine

Walther Lovato - Passport Capital

Waqar Syed - Macquarie Capital

Arun Jayaram - Credit Suisse

Jim Crandell - Barclays Capital

Jeff Tillery - Tudor Pickering & Holt

Presentation

Operator

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Good day, everyone and welcome to the first quarter 2010 results conference call for Transocean Limited. Today's call is being recorded. At this time, for opening remarks and introductions, I’d like to turn this conference over to Mr. Greg Panagos, Vice President, Investor Relations and Communications. Please go ahead, sir.

Greg Panagos

Thank you, John. Good morning and welcome to Transocean's first quarter 2010 earnings conference call. A copy of the first quarter press release covering our financial results along with supporting statements and schedules is posted on the company's website at www.deepwater.com. We've also posted a file containing four charts that will be discussed during this morning's call. That file can be found on the company's website by selecting Investor Relations, Quarterly Toolkit and then PowerPoint Charts.

The charts included cover average contracted dayrate by rig type, out of service rig months, operating and maintenance cost trends and free cash flow backlog and debt maturities. The Quarterly Toolkit also has four additional financial tables for your convenience. These tables cover revenue efficiency, other revenue details, daily operating and maintenance costs by rig type and contract intangible revenues.

Joining me on this morning's call are Steven Newman, Chief Executive Officer; Ricardo Rosa, Senior Vice President and Chief Financial Officer; Ihab Toma, Senior Vice President, of Marketing and Planning; and Terry Bonno, Vice President of Marketing.

Before I turn the call over to Steven, I’d like to point out that during the course of this conference call participants may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts, including future financial performance, operating results and the prospects for the contract drilling business.

As you know, it is inherently difficult to make projections or other forward-looking statements in a cyclical industry, since the risks, assumptions and uncertainties involved in these forward-looking statements include the level of crude oil and natural gas prices, rig demand and operational and other risks which are described in the company's most recent Form 10-K and other filings with the US Securities and Exchange Commission. Should one or more of these risks and uncertainties materialize or underlying assumptions prove incorrect, actual results may vary materially from those indicated.

Also note that we may use various numerical measures on the call today that are may be considered non-GAAP financial measures under Regulation G. As I indicated earlier, you will find the required supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation, on our website at www.deepwater.com under Investor Relations, Quarterly Toolkit and Non-GAAP Financial Measures and Reconciliations.

Finally, in order to give more people an opportunity to ask questions, please limit your questions to one initial question and one follow-up. Thank you. That concludes the preliminary details.

Now I’ll turn the call over to Steven.

Steven Newman

Thank you, Greg. Good morning, everyone and thank you for joining us this morning. Before making any comments about our first quarter results, I want to say a few words about the Deepwater Horizon incident. I know you are concerned about the incident and its aftermath. Many of you have sent condolences and messages of support and all of us at Transocean appreciate your concern very much.

On the evening of April 20 at around 10 pm the Semisubmersible Deepwater Horizon experienced an explosion and catastrophic fire. The rig had a crew of 126 people and through the quick actions and courage of many onboard a 115 people were safely evacuated. Tragically, however, we lost 11 of the Horizon’s crew nine of whom were Transocean employees. At this point we do not no the cause of the fire and explosion.

We are working to support BP and containing the well and we are conducting an investigation to determine the cause of this tragic accident. We will be dealing with the emotional consequences for some time to come we are deeply saddened by the loss of our team members and we are working closely with their families to assist them through this difficult period.

Before I close my comments on this tragic incident, I want everyone to know the following. We are determined to find out what cause this incident which resulted in the loss of 11 lives, but believe that it is in appropriate to speculate on what may have caused the catastrophic failure of a cased and cemented well in advance of that investigation. We are determined to appropriately honor the 11 individuals who lost their lives in this incident.

We will continue to live by the core values of Transocean, particularly the values of integrity and honesty respect for our customers, our fellow employees and our suppliers and safety. On safety we remain deeply committed to our company’s vision of an incident free work place all the time everywhere.

We will continue to corporate fully with BP and the government agencies to stem the flow of hydrocarbons from the well. The loss of revenue from the Deepwater Horizon will have an impact on our earnings beginning in the second quarter. The company does carry a comprehensive insurance program that will help us address the financial impact of the incidence, in fact coverage is in excess of book value of the rig, and we have already received a significant portion of the insurance reimbursement. Ricardo will provide you with more details on the financial impact of this incident based on what we know today.

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