On October 30, 2024, Transocean Ltd (RIG, Financial) released its 8-K filing detailing its financial performance for the third quarter of 2024. Transocean Ltd is a leading international provider of offshore contract drilling services for oil and gas wells, specializing in ultra-deepwater and harsh environment drilling services.
Revenue and Earnings Overview
Transocean Ltd reported contract drilling revenues of $948 million for the third quarter, exceeding the analyst estimate of $943.83 million. This represents a sequential increase of $87 million from the previous quarter, driven by increased rig utilization, higher dayrates for two rigs, and a full quarter of revenues from the newbuild ultra-deepwater drillship Deepwater Aquila.
Despite the revenue growth, the company reported a net loss attributable to controlling interest of $494 million, or $0.58 per diluted share, widening from a net loss of $123 million in the previous quarter. The adjusted net income was $64 million after accounting for net unfavorable items totaling $558 million.
Operational and Financial Challenges
The increase in operating and maintenance expenses to $563 million, up from $534 million in the prior quarter, reflects the heightened fleet activity. However, the company managed to reduce its general and administrative expenses to $47 million, down from $59 million, primarily due to cost reductions associated with early retirements and lower professional fees.
Interest expenses, net of capitalized amounts, rose to $154 million from $143 million, impacting the overall financial performance. The effective tax rate decreased significantly to 6.0% from 474.5% in the previous quarter, influenced by rig impairments and sales.
Cash Flow and Capital Expenditure
Transocean Ltd generated $194 million in cash from operating activities, marking an increase of $61 million from the previous quarter. This improvement was attributed to enhanced operating activities and better cash collection from customers. Capital expenditures for the quarter were $58 million, primarily associated with Deepwater Aquila, down from $84 million in the prior quarter.
Backlog and Market Outlook
The company reported a robust backlog of $9.3 billion, with significant bookings in the third quarter, including a notable award for Deepwater Conqueror. This backlog underscores the strong demand for Transocean's high-specification ultra-deepwater and harsh environment rigs.
“As illustrated by the nearly $1.3 billion in backlog booked in the third quarter, including the recent award for Deepwater Conqueror, the demand for our fleet of high specification ultra-deepwater and harsh environment rigs remains strong,” said Chief Executive Officer, Jeremy Thigpen.
Financial Position and Metrics
Transocean Ltd's balance sheet reflects total assets of $19.51 billion, with cash and cash equivalents amounting to $435 million. The company's long-term debt stands at $6.503 billion, a decrease from $7.043 billion at the end of 2023, indicating efforts to manage debt levels.
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Contract Drilling Revenues | $948 million | $861 million | $713 million |
| Net Loss | $(494) million | $(123) million | $(220) million |
| Adjusted EBITDA | $342 million | $284 million | $162 million |
| Backlog | $9.3 billion | - | - |
Conclusion
Transocean Ltd's third-quarter results highlight a strong revenue performance, surpassing analyst expectations, despite challenges in managing costs and net losses. The company's substantial backlog and strategic focus on high-specification rigs position it well in the competitive offshore drilling market. However, managing operational expenses and interest costs remains crucial for improving profitability and financial stability.
Explore the complete 8-K earnings release (here) from Transocean Ltd for further details.
