Transocean Ltd. (RIG)

Q4 2011 Earnings Call

February 27, 2012 10:00 am ET

Executives

Thad Vayda - VP, IR

Steven Newman - CEO

Greg Cauthen - EVP and CFO

Terry Bonno - SVP, Marketing

Analysts

Ian MacPherson - Simmons & Company

Doug Becker - Bank of America Merrill Lynch

Scott Gruber - Bernstein Asset Management

Matt Conlan - Wells Fargo

Kurt Hallead - RBC Capital Markets

Angie Sedita - UBS

Ole Slorer - Morgan Stanley

Presentation

Operator

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Good day and welcome to the Transocean fourth quarter 2011 earnings conference call. Today's conference is being recorded. At this time, for opening remarks and introductions, I'd like to turn the conference over to Thad Vayda.

Thad Vayda

Good morning and welcome to Transocean's fourth quarter and full year 2011 earnings conference call. A copy of the press release providing our financial results along with supporting statements and schedules is posted on the company's website at deepwater.com.

We've also posted a file containing three charts that may be referenced 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 include average contracted dayrate by rig type, out-of-service rig months and operating and maintenance cost trends. The Quarterly Toolkit also has four additional financial tables provided for your convenience covering revenue efficiency, other revenue detail, 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; Greg Cauthen, Executive Vice President and Chief Financial Officer Ricardo; and Terry Bonno, Senior Vice President, Marketing.

Before I turn the call over to Steven, I'd like to point out that during the course of this call, participants may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts, including but not limited to future financial performance, operating results, the prospects for the contract drilling business and the impact of the Macondo Well incident. Such statements are based upon the current expectations and certain assumptions of management and are therefore subject to certain risks and uncertainties.

As you know, it's 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 U.S. Securities & 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. Transocean neither intends to nor assumes any obligation to update or revise these forward-looking statements in light of the development which differ from those anticipated.

Also note that we may use various numerical measures on the call today that may be considered non-GAAP financial measures under Reg 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 deepwater.com under Investor Relations, Quarterly Toolkit and Non-GAAP Financial Measures and Reconciliations.

Finally, to give more people an opportunity to participate on this call, please limit your questions to one initial question and one follow-up.

Thank you very much and I'll now turn the call over to Steven Newman.

Steven Newman

Thanks, Thad, and thank you all for joining us today. A quick word regarding the rescheduling of our release and conference call. Based on the advice of counsel and in the context of the recent OPA and Clean Water Act ruling and the anticipated start of the trial today, we're elected to accelerate the disclosure of our fourth quarter and full year results by about a day. I apologize for any inconvenience this may have caused and appreciate your flexibility.

Before providing my overview of the quarter and outlook for 2012, I'd like to take a minute to reassure our shareholders, customers and employees that I am fully committed to addressing the issues that negatively affected the company's performance in 2011.

Throughout the organization, I have stressed the urgency of improving our operational performance both in shipyards and in the field and executing our asset strategy. We will continue to collaborate with our customers to deliver the right solutions, leveraging our resources and seasoned expertise.

This includes maximizing the uptime of our rigs, while achieving incident-free operations. Despite the challenges presented by the current operating environment, we will work hard to deliver the results that you expect.

I also officially welcome Greg Cauthen who accepted my invitation to temporarily return to Transocean and as CFO provide interim leadership of our finance function. The search for a permanent CFO is going well and we're fortunate to have a number of very highly qualified candidates under consideration.

Following my review of the quarter, Greg will give you the details of our fourth quarter performance and our guidance for 2012, followed by Terry who would give you color on the markets.

For the fourth quarter, we reported a net loss of $18.62 per diluted share. This net loss reflects the $5.2 billion impairment of our goodwill which we reported earlier this month and an estimated Macondo contingent loss of $1 billion. After consideration of these and the other items noted in our press release, adjusted earnings were $0.18 per share.

The fourth quarter also reflects an additional increase in our annual effective tax rate. This change in tax rate from the third quarter resulted in a $0.14 per share adverse effect on the fourth quarter's results. Greg will talk more about this in a moment.

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