Thursday, May 10, 2012

Transocean: First Quarter Results Show Company Potential

Transocean (RIG) announced its first quarter 2012 results on May 2, 2012. Here are some of the highlights from this report:
  • First quarter revenues totaled $2.331 billion. This is a decrease from the $2.422 billion in revenues in the fourth quarter of 2011.
  • First quarter 2012 net income attributable to controlling interest was $42 million. This is a significant improvement from the $6.119 billion loss that was taken during the fourth quarter of 2011. The reason for this huge disparity can be found by looking at the "net unfavorable items" category on the income statement. Transocean had $184 million of such items in the first quarter of 2012. The company had $6.176 billion of such items in the fourth quarter of 2011. If these net unfavorable items are backed out, we can see that Transocean still had a higher net income in the first quarter of 2012 compared to the fourth quarter of 2011: $226 million versus $57 million.
  • Revenue efficiency was 90.4% in the first quarter of 2012 compared to 91.9% in the fourth quarter of 2011.
  • Fleet utilization was 61% for the quarter.
  • First quarter 2012 operating and maintenance expenses were $1.410 billion. This is an improvement from the fourth quarter of 2011 which saw operating and maintenance expenses of $1.565 billion excluding estimated loss contingencies associated with the Deepwater Horizonincident.
  • Operating cash flows for the first quarter of 2012 totaled $540 million. This is a decrease from the $563 million that the company had in the fourth quarter of 2011.
Over the last few months, I have written several articles showing the strong fundamentals for the offshore drilling market. Transocean made a point of restating these trends during their earnings conference call. According to Terry Bonno, Transocean's SVP of Marketing, "Utilization and dayrates are continuing to improve and have reached levels not seen since the last cycle."

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