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Transocean (RIG) Q4 Loss Wider Than Expected, Sales Miss

Zacks Equity Research
·4-min read

Transocean Ltd. RIG reported an adjusted net loss of 34 cents per share for fourth-quarter 2020, wider than the Zacks Consensus Estimate of a loss of 16 cents. The underperformance reflects lower utilization.

However, Transocean’s bottom line improved from the year-ago adjusted loss of 43 cents due to impressive revenue efficiency and higher dayrates.

The offshore drilling powerhouse’s total revenues of $690 million missed the Zacks Consensus Estimate of $707 million. Moreover, the top line fell 12.9% from the year-earlier figure of $792 million primarily due to reduced drilling activities.

Segmental Revenue Break-Up

Transocean’s Ultra-deepwater floaters contributed to 63.8% of total contract drilling revenues, while Harsh Environment floaters accounted for the remainder. In fourth-quarter 2020, revenues from Ultra-deepwater and Harsh Environment floaters totaled $440 million and $250 million, respectively, compared with the year-ago reported figures of $502 million and $278 million.

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Revenue efficiency was 97.2%, higher than 96.6% reported sequentially and the year-ago value of 96.2%.

Dayrates and Utilization

Average dayrates in the quarter rose to $347,500 from the year-ago level of $317,700. The company witnessed strong year-over-year average revenues per day from Harsh Environment floaters. Overall, fleet utilization was 58% in the quarter, down from the prior-year utilization rate of 61%.

Backlog

Transocean’s backlog record at $7.8 billion as of February reflects a decline of $2.4 billion from the year-ago figure.

Transocean Ltd. Price, Consensus and EPS Surprise

Transocean Ltd. Price, Consensus and EPS Surprise
Transocean Ltd. Price, Consensus and EPS Surprise

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

Costs, Capex & Balance Sheet

Operating and maintenance costs decreased to $465 million from $575 million a year ago. The company spent $47 million on capital investment in the fourth quarter. Cash provided by operating activities totaled $278 million. The company had cash and cash equivalents worth $1.15 billion as of Dec 31, 2020. Long-term debt was $7.30 billion, with debt-to-capitalization of 40% as of the same date, declining from the sequential quarter’s 40.6%.

Guidance

For 2021, Transocean projects adjusted contract drilling revenues of $2.7 billion. Notably, the company expects operations and maintenance expenses of $1.6 billion for 2021, while G&A expenses are expected to be $160 million.

Meanwhile, capital spending for 2021, comprising capitalized interest, is estimated to be $1.3 billion. The amount also assumes $1.2 billion for the newbuild drillships under construction and the remaining $100 billion for maintenance.

For the first quarter of 2021, this offshore drilling contractor expects adjusted contract drilling revenues of $680 million, with first-quarter operations and maintenance expenses of $445 million. Notably, its G&A expenses are expected to be $40 million, while capital expenditure, including capitalized interest, is estimated to be $115 million.

Zacks Rank & Stocks to Consider

Transocean currently has a Zacks Rank #5 (Strong Sell).

Some better-ranked players in the energy space are EOG Resources, Inc. EOG, ConocoPhillips COP and China Petroleum & Chemical Corporation SNP, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EOG’s bottom line for 2021 is expected to surge 213.8% year over year.

ConocoPhillips’s bottom line for 2021 is expected to grow 14.8% year over year.

China Petroleum’s bottom line for 2021 is expected to rise 10% year over year.

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