Transocean Inc. Reports Fourth Quarter and Full-Year 2006 Results.HOUSTON -- Transocean Inc. (NYSE NYSE See: New York Stock Exchange :RIG) today reported net income for the three months ended December 31, 2006 of $621 million, or $2.05 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, on record quarterly revenues of $1,186 million. The results compare to net income of $152 million, or $0.45 per diluted share, on revenues of $771 million, for the three months ended December 31, 2005. Net income for the three months ended December 31, 2006 included after-tax gains of $192 million, or $0.63 per diluted share, resulting primarily from the sale of two rigs, the Transocean Wildcat wildcat, common name of two Old World cats, the European wildcat, Felis sylvestris, of Europe and W Asia, and the African wildcat, or kaffir cat, F. lybica, of Africa and Asia. and the Searex IX, and other income of $51 million, or $0.17 per share, that we recognized from our tax sharing agreement with TODCO TODCO Technical Order Distribution Control Office in 2006. For the 12 months ended December 31, 2006, net income totaled $1,385 million, or $4.28 per diluted share, on revenues of $3,882 million, compared to net income of $716 million, or $2.13 per diluted share, on revenues of $2,892 million for the corresponding 12 months in 2005. Net income for the 12 months ended December 31, 2006 included after-tax gains totaling $437 million, or $1.34 per share, resulting from the sale of non-strategic assets, including the two above-mentioned rigs, and income that we recognized from the tax sharing agreement with TODCO in 2006. Net income for the 12 months ended December 31, 2005 included a gain of $165 million, or $0.49 per diluted share, resulting from the sale of TODCO common stock, after-tax gains of $28 million, or $0.08 per diluted share, resulting from the sale of three rigs, other income of $11 million, or $0.03 per diluted share, earned from our tax sharing agreement with TODCO, and a loss of $7 million, or $0.02 per diluted share, resulting from the early retirement of debt. Robert L. Long, Chief Executive Officer of Transocean Inc., stated, "We had a good quarter with revenues up 16% breaking the prior quarter's record revenues and with costs up less than 2% from the prior quarter. We are entering 2007 with a record contract backlog and a continuation of the excellent market conditions that we saw in 2006." Operations Quarterly Review Revenues for the three months ended December 31, 2006 increased to $1,186 million compared to revenues of $1,025 million during the three months ended September 30, 2006. The increase was primarily due to an improvement in average daily revenue, which rose 17% to $171,700 from $146,900 during the three months ended September 30, 2006. This improvement was consistent across the company's fleet as several rigs commenced new contracts with dayrates that reflect the strong business environment prevalent since mid-2004. In addition, fourth quarter 2006 revenues were enhanced by the return to operation of the semisubmersible sem·i·sub·mers·i·ble n. A seagoing, self-propelled barge that rides at anchor, stands on partially submerged vertical legs on submerged pontoons, and serves as living quarters and a base of operations in offshore drilling. rig Sedco 709 and the drillship Deepwater Discovery which were both idle for maintenance programs during the third quarter of 2006 and by a full quarter of activity of the semisubmersible rigs Transocean Winner and Transocean Prospect after they completed their reactivation reactivation to become active after a period of quiescence or, as in bacterial and viral infections, latency. cross reactivation programs in the third quarter of 2006. For the three months ended December 31, 2006, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before general and administrative expenses totaled $701 million, a 70% improvement from $412 million reported for the third quarter of 2006. Field operating income(1) (defined as revenues less operating and maintenance expenses) improved 33% to $616 million compared to $464 million over the same comparative period. These improved fourth quarter 2006 results were due chiefly to the strong revenue growth, partially offset by an increase in operating and maintenance expenses, which totaled $570 million during the fourth quarter of 2006 compared to $561 million during the previous quarter in 2006. The increase in operating and maintenance activity was due primarily to the increased number of maintenance projects completed on our operating rigs during the quarter and higher labor costs related to ongoing recruitment efforts and the continued inflationary pressure on wages. This increase was partially offset by a decrease in shipyard expenditures following the return to activity of the Sedco 709, Deepwater Discovery, Transocean Winner and Transocean Prospect during the third and fourth quarter. Liquidity Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses increased to $1,237 million for the 12 months ended December 31, 2006. The company reported a decrease in total debt of approximately $200 million, to $3,295 million at December 31, 2006 compared to total debt at September 30, 2006 of $3,495 million, resulting from a draw of $100 million on the $1.0 billion multi-draw term credit facility and net of repayments of $300 million in the fourth quarter of 2006. Effective Tax Rate The company's Annual Effective Tax Rate(2) for the 12 months ended December 31, 2006 was 18.5%, excluding the previously mentioned impact on income before income tax related to the gains from the rig sales and the TODCO tax sharing agreement as well as excluding from income tax expense various discrete tax items. The Effective Tax Rate(3) of 10.4% for the fourth quarter of 2006 reflects the impact of the previously mentioned rig sales and TODCO tax sharing income in addition to a $17 million favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact resulting from changes in estimates and resolution of prior years' tax disputes in various jurisdictions. Share Buyback In May 2006, the company's board of directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: an increase in the overall amount of ordinary shares which may be repurchased under the company's share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program from $2.0 billion to $4.0 billion. During the three months ended December 31, 2006, the company purchased and retired $250 million of its ordinary shares, which amounted to approximately 3.5 million ordinary shares at an average purchase price of $71.79 per share. As of January 31, 2007, the company had repurchased and retired a total of $3.0 billion of its ordinary shares under the program, which amounted to approximately 42 million ordinary shares at an average purchase price of $71.87 per share, and the company retained the authority to repurchase the remaining $1.0 billion of its ordinary shares under the program. Conference Call Information Transocean will conduct a teleconference call at 10:00 a.m. Eastern on February 14, 2007. To participate, dial 913-981-5522 and refer to confirmation code 2410660 approximately five to 10 minutes prior to the scheduled start time of the call. In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto the company's website at www.deepwater.com and selecting "Investor Relations/Presentations." A file containing four charts to be discussed during the conference call, titled "4Q06 Charts," has been posted to the company's website and can also be found by selecting "Investor Relations/Presentations." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in the company's New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. trading symbol Trading symbol See: Ticker symbol , "RIG." A telephonic replay of the conference call should be available after 1:00 p.m. Eastern on February 14, 2007 and can be accessed by dialing 719-457-0820 and referring to the passcode 2410660. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced Worldwide Web addresses. Forward-Looking Disclaimer Statements regarding our backlog, market conditions, rig demand, our share repurchase plan share repurchase plan A corporation's plan for buying back a predetermined number of its own shares in the open market. Institution of a share repurchase plan derives from management's view that the company has limited outside investment opportunities and , prospects for our business, as well as any other statements that are not historical facts in this release, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve certain risks, uncertainties and assumptions. These include but are not limited to operating hazards and delays, risks associated with international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , future financial results, actions by customers and other third parties, factors affecting the supply and demand of drilling rigs, including newbuilds, reactivations and the reallocation Noun 1. reallocation - a share that has been allocated again allocation, allotment - a share set aside for a specific purpose 2. reallocation of current rigs, factors affecting the duration of contracts including well-in-progress provisions, the actual amount of downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. , factors resulting in reduced applicable dayrates, hurricanes and other weather conditions, the future price of oil and gas and other factors detailed in the company's most recent Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. Transocean Inc. is the world's largest offshore drilling Offshore drilling typically refers to the act of extracting resources, primarily oil, in an ocean or lake. Controversy As with all oil drilling, there has been a certain level of controversy surrounding the issue. contractor with a fleet of 82 mobile offshore drilling units. The company's mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, 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. The company's fleet consists of 33 High-Specification Floaters floaters /float·ers/ (flo´ters) “spots before the eyes”; deposits in the vitreous of the eye, usually moving about and probably representing fine aggregates of vitreous protein occurring as a benign degenerative change. (semisubmersibles and drillships), 20 Other Floaters, 25 Jackups and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. utilized in the support of offshore drilling activities worldwide. With a current equity market capitalization Equity Market Capitalization A measure of the total market value of an equity market. The measure is calculated by taking the market capitalization of all companies in the equity market and adding them together to arrive at the capitalization for the market as a whole. in excess of $22 billion, Transocean Inc.'s ordinary shares are traded on the New York Stock Exchange under the symbol "RIG." 1 For a reconciliation of operating income before general and administrative expense to field operating income, see the accompanying schedule titled Non-GAAP Financial Measures and Reconciliations - Operating Income Before General and Administrative Expense to Field Operating Income. 2 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 Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). Interpretation No. 18. See accompanying schedule titled Effective Tax Rate Analysis. 3 Effective Tax Rate is income tax expense divided by income before income taxes. See accompanying schedule titled Effective Tax Rate Analysis. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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