Transocean Roughed Up

The shares are hit on lackluster first-half guidance.
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Transocean's

(RIG) - Get Report

shares were sold down Tuesday after the drilling-rig supplier said high costs and downtime would whack growth in the first half of 2006.

Transocean also reported a relatively weak fourth quarter, posting earnings of $151.6 million, or 45 cents a share, compared with a loss of $73.4 million, or 23 cents a share, a year ago. Analysts surveyed by Thomson First Call were expecting earnings of 48 cents a share in the latest period.

Sales rose 1% from a year ago to $771.2 million, missing the Thomson First Call estimate of $785 million. Transocean said unusually high rates paid for the use of its drilling equipment were offset by service interruptions for rig repairs and shipyard programs -- factors that will also hurt future earnings.

"The combination of higher operating and maintenance expenses and lost revenue due to out-of-service time and delays in the start of higher dayrate contracts are expected to lead to generally flat earnings in each of the first two quarters of 2006 relative to the fourth quarter of 2005, excluding the effect of gains from potential rig sales."

Analysts were forecasting earnings of 67 cents and 91 cents a share in the first and second quarters, according to Thomson First Call.

"Operating and maintenance costs for the second half of the year are expected to gradually decline toward the level experienced in the fourth quarter of 2005, although the possible reactivation of the semisubmersible rigs C. Kirk Rhein, Jr. and Transocean Wildcat, inflationary cost pressure and other factors could slow the anticipated decline," the company said.

Shares fell $5.98, or 7.6%, to $72.61.