Transocean Ltd. Reports Second Quarter 2009 Financial Results

Transocean Ltd. (NYSE: RIG) today reported net income attributable to controlling interest for the three months ended June 30, 2009 of $806 million, or $2.49 per diluted share, compared to net income attributable to controlling interest of $1.065 billion, or $3.31 per diluted share for the three months ended June 30, 2008. Revenues for the second quarter of 2009 were $2.882 billion compared to $3.102 billion for the second quarter of 2008.

Second quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $96 million, or $0.30 per diluted share, as follows:

• $67 million of write-downs to fair market value for the GSF Arctic II and GSF Arctic IV semisubmersible rigs held for sale, as well as an impairment of an intangible asset related to drilling management services, and
• A $29 million net loss primarily related to discrete tax items, the retirement of debt, the sale of an interest in a joint venture and expenses associated with the merger of Transocean and GlobalSantaFe.

Operations Quarterly Review

Revenues for the three months ended June 30, 2009 decreased 7.6 percent to $2.882 billion compared to revenues of $3.118 billion during the three months ended March 31, 2009. Of the $236 million quarter-to-quarter decrease, $209 million primarily reflected a decline in rig utilization across all rig categories, primarily related to the stacking of jackup and midwater units, a planned increase in shipyard activity and downtime resulting from unplanned operational events. Non-cash contract drilling intangible revenues also declined $29 million, compared to the first quarter 2009.

Operating and maintenance expenses for the three months ended June 30, 2009 were $1.277 billion compared to $1.171 billion for the prior three-month period, an increase of $106 million or 9.1 percent. The quarter-to-quarter increase in operating and maintenance costs consisted of $87 million related to an increase in shipyard and maintenance costs and increased costs related to newbuild rigs about to commence operations, partially offset by reduced operating costs due to stacked rigs.

General and administrative expenses decreased 5.4 percent to $53 million for the second quarter of 2009 compared to $56 million for the first quarter 2009. The decrease primarily reflects a $4 million decline in expenses related to the merger with GlobalSantaFe.

Interest Expense and Liquidity

Interest expense, net of amounts capitalized, for the second quarter of 2009 totaled $114 million compared to $136 million for the first quarter of 2009. The decrease in interest expense primarily related to lower average outstanding debt balances during the quarter compared to the first quarter 2009.

As of June 30, 2009, total debt was $12.053 billion, compared to total debt of $12.964 billion as of March 31, 2009, a decrease of $911 million.

Cash flow from operating activities totaled $1.576 billion for the second quarter of 2009 compared to $1.441 billion for the first quarter of 2009.

Effective Tax Rate

Transocean’s reported Effective Tax Rate⁽¹⁾ of 18.5 percent for the second quarter of 2009 reflects various discrete tax items of $16 million which primarily resulted from changes in estimates, as well as the impact of the write-down of rigs to fair market value, as described above. Excluding these items, the Annual Effective Tax Rate⁽²⁾ for the second quarter of 2009 was 15.7 percent versus 15.2 percent in the first quarter of 2009.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. Eastern time, 4:00 p.m. Swiss time, today. To participate, dial +1 (913) 981-4904 and refer to confirmation code 9249616 approximately five to 10 minutes prior to the scheduled start time of the call. In addition, the conference call will be simultaneously broadcast in a listen-only mode over the Internet and can be accessed by logging onto the company’s Web address at www.deepwater.com and selecting “Investor Relations.” It may also be accessed at www.CompanyBoardroom.com by typing in Transocean’s New York Stock Exchange trading symbol, “RIG.” A file containing five charts to be discussed during the conference call, titled “2Q09 Charts,” has been posted to Transocean’s Web site and can be found by selecting “Investor Relations.”

A telephonic replay of the conference call should be available after 1:00 p.m. Eastern time, 7:00 p.m. Swiss time, on August 5, 2009 and can be accessed by dialing +1 (719) 457-0820 and referring to the passcode 9249616. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Both replay options will be available for approximately 30 days.

Transocean is the world's largest offshore drilling contractor and the leading provider of drilling management services worldwide. With a fleet of 133 mobile offshore drilling units plus 10 announced ultra-deepwater newbuild units, Transocean's fleet is considered one of the most modern and versatile in the world due to its emphasis on technically demanding segments of the offshore drilling business. Transocean owns or operates a contract drilling fleet of 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 26 Midwater Floaters, 10 High-Specification Jackups, 55 Standard Jackups and other assets utilized in the support of offshore drilling activities worldwide.

⁽¹⁾ Effective Tax Rate is defined as income tax expense divided by income before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

⁽²⁾ Annual Effective Tax Rate is defined as income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited)
		Three months ended June 30,								Six months ended June 30,
		2009			2008					2009				2008
					(As adjusted)									(As adjusted)
Operating revenues
Contract drilling revenues	$	2,625			$	2,596				$	5,459			$	5,227
Contract drilling intangible revenues		75				190					179				414
Other revenues		182				316					362				571
		2,882				3,102					6,000				6,212
Costs and expenses
Operating and maintenance		1,277				1,364					2,448				2,521
Depreciation, depletion and amortization		360				337					715				704
General and administrative		53				45					109				94
		1,690				1,746					3,272				3,319
Impairment loss		(67	)			—					(288	)			—
Loss from disposal of assets, net		(4	)			(6	)				—				(3	)
Operating income		1,121				1,350					2,440				2,890
Other income (expense), net
Interest income		1				10					2				23
Interest expense, net of amounts capitalized		(114	)			(153	)				(250	)			(330	)
Loss on retirement of debt		(8	)			(1	)				(10	)			(3	)
Other, net		(8	)			(2	)				—				(8	)
		(129	)			(146	)				(258	)			(318	)
Income before income tax expense		992				1,204					2,182				2,572
Income tax expense		184				140					435				358
Net income		808				1,064					1,747				2,214
Net income (loss) attributable to noncontrolling interest		2				(1	)				(1	)			—
Net income attributable to controlling interest	$	806			$	1,065				$	1,748			$	2,214
Earnings per share
Basic	$	2.50			$	3.34				$	5.43			$	6.95
Diluted	$	2.49			$	3.31				$	5.42			$	6.89
Weighted average shares outstanding
Basic		320				318					320				318
Diluted		321				321					321				321

TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except share data) (Unaudited)
		June 30,				December 31,
		2009				2008
						(As adjusted)
ASSETS
Cash and cash equivalents		$	907			$	963
Short-term investments			174				333
Accounts receivable, net of allowance for doubtful accounts of $52 and $114 at June 30, 2009 and December 31, 2008, respectively			2,674				2,864
Materials and supplies, net of allowance for obsolescence of $57 and $49 at June 30, 2009 and December 31, 2008, respectively			451				432
Deferred income taxes, net			46				63
Assets held for sale			186				464
Other current assets			192				230
Total current assets			4,630				5,349
Property and equipment			27,275				25,836
Less accumulated depreciation			5,624				4,975
Property and equipment, net			21,651				20,861
Goodwill			8,134				8,128
Other assets			842				844
Total assets		$	35,257			$	35,182
LIABILITIES AND EQUITY
Accounts payable		$	829			$	914
Accrued income taxes			235				317
Debt due within one year			1,163				664
Other current liabilities			732				806
Total current liabilities			2,959				2,701
Long-term debt			10,890				12,893
Deferred income taxes, net			699				666
Other long-term liabilities			1,714				1,755
Total long-term liabilities			13,303				15,314
Commitments and contingencies
Shares, CHF 15.00 par value, 502,852,947 authorized, 167,617,649 contingently authorized, 335,235,298 issued and 320,953,074 outstanding at June 30, 2009 and 502,852,947 authorized, 167,617,649 contingently authorized, 335,235,298 issued and 319,262,113 outstanding at December 31, 2008			4,468				4,444
Additional paid-in capital			7,388				7,313
Retained earnings			7,575				5,827
Accumulated other comprehensive loss			(449	)			(420	)
Total controlling interest shareholders’ equity			18,982				17,164
Noncontrolling interest			13				3
Total equity			18,995				17,167
Total liabilities and equity		$	35,257			$	35,182

TRANSOCEAN LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
		Three months ended June 30,										Six months ended June 30,
		2009					2008					2009					2008
							(As adjusted)										(As adjusted)
Cash flows from operating activities
Net income		$	808				$	1,064				$	1,747				$	2,214
Adjustments to reconcile net income to net cash provided by operating activities
Amortization of drilling contract intangibles			(75	)				(190	)				(179	)				(414	)
Depreciation, depletion and amortization			360					337					715					704
Share-based compensation expense			24					11					43					33
Excess tax benefit from share-based compensation plans			—					(8	)				(1	)				(11	)
Loss from disposal of assets, net			4					6					—					3
Impairment loss			67					—					288					—
Loss on retirement of debt			8					1					10					3
Amortization of debt issue costs, discounts and premiums, net			57					44					109					85
Deferred revenue, net			49					7					43					25
Deferred expenses, net			(37	)				(145	)				(35	)				(129	)
Deferred income taxes			20					(31	)				26					(56	)
Other, net			14					(7	)				23					(8	)
Changes in operating assets and liabilities			277					(78	)				228					44
Net cash provided by operating activities			1,576					1,011					3,017					2,493
Cash flows from investing activities
Capital expenditures			(947	)				(420	)				(1,655	)				(1,189	)
Proceeds from disposal of assets, net			—					93					8					347
Proceeds from short-term investments			172					—					393					—
Purchases of short-term investments			(234	)				—					(234	)				—
Joint ventures and other investments, net			—					—					—					(3	)
Net cash used in investing activities			(1,009	)				(327	)				(1,488	)				(845	)
Cash flows from financing activities
Change in short-term borrowings, net			(476	)				(351	)				(500	)				(355	)
Proceeds from debt			231					75					319					2,051
Repayments of debt			(708	)				(1,040	)				(1,410	)				(3,673	)
Payments for warrant exercises, net			(13	)				—					(13	)				(4	)
Proceeds from share-based compensation plans, net			5					34					22					61
Excess tax benefit from share-based compensation plans			—					8					1					11
Other, net			(1	)				(1	)				(4	)				(4	)
Net cash used in financing activities			(962	)				(1,275	)				(1,585	)				(1,913	)
Net decrease in cash and cash equivalents			(395	)				(591	)				(56	)				(265	)
Cash and cash equivalents at beginning of period			1,302					1,567					963					1,241
Cash and cash equivalents at end of period		$	907				$	976				$	907				$	976

		TRANSOCEAN LTD. FLEET OPERATING STATISTICS
			Operating Revenues ($ Millions) (1)
			Three months ended						Six months ended June 30,
			June 30, 2009		March 31, 2009		June 30, 2008		2009		2008
Contract Drilling Revenues
	High-Specification Floaters:
		Ultra Deepwater Floaters	$ 673		$ 702		$ 558		$1,375		$1,166
		Deepwater Floaters	406		413		377		819		702
		Harsh Environment Floaters	159		158		168		317		318
	Total High-Specification Floaters		1,238		1,273		1,103		2,511		2,186
	Midwater Floaters		644		708		650		1,352		1,325
	High-Specification Jackups		128		151		148		278		304
	Standard Jackups		608		689		674		1,298		1,385
	Other Rigs		7		13		21		20		27
Subtotal			2,625		2,834		2,596		5,459		5,227
Contract Intangible Revenue			75		104		190		179		414
Other Revenues
		Client Reimbursable Revenues	48		50		50		98		98
		Integrated Services and Other	52		53		35		105		78
		Drilling Management Services	74		70		214		145		353
		Oil and Gas Properties	8		7		17		14		42
Subtotal			182		180		316		362		571
Total Company			$2,882		$3,118		$3,102		$6,000		$6,212
			Average Dayrates (1)
			Three months ended						Six months ended June 30,
			June 30, 2009		March 31, 2009		June 30, 2008		2009		2008
	High-Specification Floaters:
		Ultra Deepwater Floaters	$450,500		$451,000		$390,400		$450,800		$385,300
		Deepwater Floaters	$339,600		$336,900		$317,400		$338,200		$301,100
		Harsh Environment Floaters	$374,500		$351,100		$379,400		$362,500		$361,900
	Total High-Specification Floaters		$397,600		$393,800		$360,500		$395,700		$350,500
	Midwater Floaters		$302,700		$314,700		$299,300		$308,900		$295,700
	High-Specification Jackups		$161,400		$169,500		$178,000		$165,700		$175,800
	Standard Jackups		$149,200		$156,400		$149,400		$152,900		$147,700
	Other Rigs		$ 48,300		$ 46,700		$ 77,400		$ 47,300		$ 49,100
Total Drilling Fleet			$255,900		$256,500		$239,300		$256,200		$233,700
			Utilization (1)
			Three months ended						Six months ended June 30,
			June 30, 2009		March 31, 2009		June 30, 2008		2009		2008
	High-Specification Floaters:
		Ultra Deepwater Floaters	91%		96%		87%		94%		92%
		Deepwater Floaters	82%		85%		81%		84%		80%
		Harsh Environment Floaters	93%		100%		98%		96%		97%
	Total High-Specification Floaters		88%		92%		86%		90%		88%
	Midwater Floaters		84%		89%		82%		86%		85%
	High-Specification Jackups		87%		99%		91%		93%		95%
	Standard Jackups		82%		89%		89%		85%		91%
		Other Rigs	59%		99%		100%		80%		100%
Total Drilling Fleet			84%		91%		87%		87%		89%
		(1) Average daily revenue is defined as contract drilling revenue earned per revenue earning day in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement of operations. Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in our fleet.

	Transocean Ltd. and Subsidiaries
	Non-GAAP Financial Measures and Reconciliations
	Operating Income Before General and Administrative Expense
	to Field Operating Income
	(In millions)
				Three months ended										Six months ended
				June 30,			March 31,				June 30,			June 30,			June 30,
				2009			2009				2008			2009			2008
	Operating revenue			$	2,882		$	3,118			$	3,102		$	6,000		$	6,212
	Operating and maintenance expense				1,277			1,171				1,364			2,448			2,521
	Depreciation, depletion and amortization				360			355				337			715			704
	Impairment Loss				67			221				-			288			-
	(Gain) loss from disposal of assets, net				4			(4	)			6			-			3
Operating income before general and administrative expense					1,174			1,375				1,395			2,549			2,984
Add back (subtract):
	Depreciation, depletion and amortization				360			355				337			715			704
	Impairment Loss				67			221				-			288			-
	(Gain) loss from disposal of assets, net				4			(4	)			6			-			3
Field operating income				$	1,605		$	1,947			$	1,738		$	3,552		$	3,691

	Transocean Ltd. and Subsidiaries
	Supplemental Effective Tax Rate Analysis
	(In millions)
						Three months ended												Six months ended
						June 30,				Mar. 31,				June 30,				June 30,			June 30,
							2009				2009				2008				2009		2008
														(As Adjusted)							(As Adjusted)
Income before income taxes and minority interest						$	992			$	1,190			$	1,204			$	2,182		$	2,572
	Add back (subtract):
				Impairment loss			67				221				-				288			-
				Loss on sale of CDC interest			4				-				-				4			-
				Gain on sale of Sedco 135D rig & inventory			(1	)			-				-				(1	)		-
				GSF Merger related costs			2				6				3				8			4
				Loss on retirement of debt			8				2				1				10			3
Adjusted income before income taxes							1,072				1,419				1,208				2,491			2,579
Income tax expense							184				251				140				435			358
	Add back (subtract):
				GSF Merger related costs			-				1				-				1			-
				Changes in estimates (1)			(16	)			(36	)			2				(52	)		(25	)
Adjusted income tax expense (2)						$	168			$	216			$	142			$	384		$	333
Effective Tax Rate (3)							18.5	%			21.1	%			11.6	%			19.9	%		13.9	%
Annual Effective Tax Rate (4)							15.7	%			15.2	%			11.8	%			15.4	%		12.9	%
(1		)		Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in deferred taxes valuation allowances on deferred taxes and other tax liabilities.
(2		)		The three months ended June 30, 2009 include $3 million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate.
(3		)		Effective Tax Rate is income tax expense divided by income before income taxes.
(4		)		Annual Effective Tax Rate is income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains on sales and similar items pursuant to Financial Accounting Standards Board Interpretation No. 18.