Transocean (RIG) Posts Narrower Loss, Revenue Beat in Q2

Shares of Transocean Ltd. RIG jumped more than 16% on Tuesday after the company reported a narrower-than-expected second-quarter loss the day before.

Transocean reported an adjusted net loss of 10 cents per share in the second quarter of 2022, narrower than the Zacks Consensus Estimate of a loss of 11 cents. This marginal outperformance reflects a sequential increase in revenues due to an increase in activity.

Moreover, RIG’s bottom line improved from the year-ago period’s loss of 18 cents.

The offshore drilling powerhouse’s total adjusted revenues of $722 million beat the Zacks Consensus Estimate of $687 million. Adjusted revenues rose 10% from the year-earlier figure of $656 million.

In a separate press release, Transocean stated that the ultra-deepwater drillship, Petrobras 10000, received a 5.8-year contract for work, offshore Brazil, from a national oil company. The contract will add an estimated $915 million in the backlog and is anticipated to begin in October 2023 and end in August 2029.

Segmental Revenue Breakup

Transocean’s ultra-deepwater floaters contributed to 65.2% of the total contract drilling revenues, while harsh environment floaters accounted for the remaining 34.8%. In the second quarter of 2022, revenues from the ultra-deepwater and harsh environment floaters totaled $451 million and $241 million, respectively, compared with the corresponding year-ago quarter’s reported figures of $424 million and $232 million.

Revenue efficiency was 97.8%, higher than the 94.9% reported sequentially but lower than the year-ago value of 98%.

Transocean Ltd. Price, Consensus and EPS Surprise

Transocean Ltd. Price, Consensus and EPS Surprise

Transocean Ltd. price-consensus-eps-surprise-chart | Transocean Ltd. Quote

Dayrates, Utilization & Backlog

Average dayrates in the quarter declined to $358,100 from the year-ago level of $369,400. RIG witnessed a strong year-over-year increase in average revenues per day from Harsh Environment floaters from $379,900 to $406,000 but a decrease in the same from Ultra-deepwater floaters from $363,500 in the year-ago quarter to $334,400. Overall, fleet utilization was 58.2% in the quarter, up from the prior-year period’s utilization rate of 54.9%.

Transocean’s backlog record of $6.2 billion for the quarter reflects a sequential increase from $6.1 billion in the last quarter.

Costs, Capex & Balance Sheet

Operating and maintenance costs decreased marginally to $433 million from $434 million a year ago. The company spent $115 million on capital investments in the second quarter. Cash provided by operating activities stood at $40 million. The company had cash and cash equivalents worth $729 million as of Jun 30, 2022. The long-term debt was $6.37 billion, with a debt-to-capitalization of 36.3% as of the same date.

Guidance

For the third quarter of 2022, this offshore drilling contractor expects adjusted contract drilling revenues of $670 million, and third-quarter operations and maintenance expenses are projected at approximately $464 million. For full-year 2022, Transocean anticipates adjusted revenues of approximately $2.6 billion and operations and maintenance expenses of $1.7 billion. Its general and administrative expenses for the third quarter are expected at around $45 million and approximately $175 million for the full year. The net interest expense for the third quarter is forecast to be roughly $98 million and about $395 million for 2022. The liquidity forecast for RIG includes the estimated 2022 capital expenditure and capital addition of $1.2 billion and the 2023 CapEx expectation of $200 million. The 2022 CapEx includes $1.1 billion related to the company’s newbuild and $60 million for maintenance CapEx

Finally, cash taxes for the year are expected to be roughly around $34 million.

Zacks Rank & Other Stocks to Consider

Transocean currently has a Zacks Rank #3 (Hold). Some top-ranked stocks from the energy space that warrant a look include EnLink Midstream ENLC, Liberty Energy LBRT and Phillips 66 PSX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for EnLink’s 2022 earnings stands at 35 cents per share, up 600% from the year-ago earnings of 5 cents.

The Zacks Consensus Estimate for ENLC’s 2022 earnings has been revised upward by about 20.7% over the past 60 days from 29 cents to 35 cents per share.

The Zacks Consensus Estimate for Liberty’s 2022 earnings is pegged at $1.36 per share, up about 233.3% from the year-ago loss of $1.02.

The Zacks Consensus Estimate for LBRT’s 2022 earnings has been revised upward by about 177.5% over the past 60 days from 49 cents to $1.36 per share.

Phillips beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 36.4%.

The Zacks Consensus Estimate for PSX’s 2022 earnings stands at $14.49 per share, up about 154.2% from the year-ago earnings of $5.70.

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