Transocean Ltd. Q2 2010 Earnings Call Transcript

Transocean Ltd. Q2 2010 Earnings Call Transcript
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Transocean Ltd. (RIG)

Q2 2010 Earnings Conference Call

August 5, 2010 10:00 AM ET

Executives

Gregory Panagos – VP, IR and Communications

Steven Newman – President, CEO and COO

Ricardo Rosa – SVP and CFO

Terry Bonno – VP, Marketing

Analysts

Jeff Tillery – Tudor, Pickering, Holt

Arun Jayaram – Credit Suisse

Ian MacPherson – Simmons & Company

Angie Sedita – UBS

Scott Gruber – Bernstein

Andrea Sharkey – Gabelli & Company

Robin Shoemaker – Citi

Scott Burk – Oppenheimer

Matt Conlan – Wells Fargo Securities

Kurt Hallead – RBC Capital Markets

Brian Uhlmer – Pritchard Capital

Lukas Daul – SEB Investments

Rob Mackenzie – FBR Capital Markets

Waqar Syed – Macquarie Capital

Jud Bailey – Jefferies & Company

Dan Zimmer – GT Trading

Geoff Kieburtz – Weeden & Company

Presentation

Operator

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» Transocean Ltd. Q1 2010 Earnings Call Transcript
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Good day, everyone and welcome to the Transocean Limited second quarter 2010 earnings results conference call. Today’s conference is being recorded. At this time, for opening remarks and introductions, I’d like to turn this conference over to Mr. Gregory Panagos, Vice President, Investor Relations and Communications. Please go ahead, sir.

Gregory Panagos

Thank you, Jake. Good morning everyone, welcome to Transocean’s second quarter 2010 earnings conference call. A copy of the second 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 covering revenue efficiency, other revenue details, daily operating and maintenance costs by rig type and contract intangibles.

Joining me on this morning’s call are Steven Newman, our 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 would 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, such as 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 or may be considered non-GAAP financial measures under Reg G. As I indicated earlier, you will find the required supplemental financial disclosures 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, 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 and that concludes the preliminary details.

Now I’ll turn the call over to Steven.

Steven Newman

Thanks, Greg. Good morning, everyone and thank you for joining us this morning. Our second quarter earnings came in at $2.22 per diluted share. After adjusting for the items highlighted in our press release, diluted earnings per share would have been a $1.67. So our results were slightly below street estimates, driven by a drop in revenue efficiency and increased cost as a result of the Macondo well incident.

Ricardo will walk you through the second quarter results and our outlook for the remainder of 2010 including our updated estimates of the impact of the Macondo well incident in a few minutes. As I said on our first quarter call, the company remains focused on three key priorities related to the Macondo well tragedy. Working with all of the Transocean personnel who had been affected by this tragedy, especially the families who lost loved ones and the men and women who worked on the Deepwater Horizon.

Supporting BP in the unified area of command and the efforts to permanently plug the Macondo well. And I want to say how proud I am of the crews of the Transocean rigs which have been involved in these efforts. And third, finding out what caused this terrible tragedy.

Through this entire ordeal, our organization has remained strong, steadfast and focused and we appreciate the support, we have received from our customers and our colleagues in the drilling industry. During the second quarter, our management and operations teams around the world remained focus on their business in spite of the potential distraction of the Macondo well events in the Gulf of Mexico.

As I mentioned though, our revenue efficiency did slip in a bit in the second quarter driven by startup issues with the few of the newbuilds and unplanned downtime on some of the deepwater and Ultra-Deepwater fleet. Some of this unplanned downtime related to BOP equipment and control systems, resulting from the rigorous testing and maintenance, we always perform as part of our standard operating procedures.

Our investigation of the Macondo well events is progressing and we continue to respond to request for information from Congress and the administration and others including BP. We have an active dialog with the US Department of Justice, and demonstrating to them the ability of our US subsidiaries to meet any Macondo well related obligations.

As part of those discussions, we have agreed to temporarily suspend activities under our shareholder approved stock repurchase program pending further discussions with the DOJ. As we have regularly stated since the event, we have a broad indemnity in our drilling contract from BP with respect to among other matters, claims related to the cleanup of pollution from the well, or claims resulting from such pollution.

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