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Transocean (RIG) Q1 Loss Narrower Than Expected, Revenues Miss

Transocean, Inc. RIG reported an adjusted net loss of 3 cents per share in the first quarter of 2024. The figure was narrower than the Zacks Consensus Estimate of a loss of 13 cents per share. RIG’s bottom line also improved from the year-ago period’s reported loss of 38 cents per share. This improvement can be attributed to strong first-quarter performance of RIG's Ultra-deepwater floaters segment.

The offshore drilling powerhouse’s total adjusted revenues of $767 million missed the Zacks Consensus Estimate of $779 million. However, the top line improved 18.2% from the prior-year reported figure of $649 million. This outperformance was primarily due to increased activity for rigs, higher day rates and increased reimbursable revenues.

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

Segmental Revenue Breakup

Transocean’s Ultra-deepwater floaters contributed 74.6% to net contract drilling revenues, while Harsh Environment floaters accounted for the remaining 25.4%.

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Revenues from the Ultra-deepwater and Harsh Environment floaters totaled $569 million and $194 million, respectively, compared with the year-ago quarter’s reported figures of $484 million and $165 million.

Ultra-deepwater and Harsh Environment revenues fell short of our projection of $571.5 million and $208.1 million, respectively.

Revenue efficiency dropped to 92.9% from 97% in the year-ago quarter.

Day rates, Utilization & Backlog

Average day rates in the reported quarter increased to $408,200 from $364,100 in the year-ago period. The figure missed our estimate of $431,300.

Average revenues per day from Ultra-deepwater floaters increased to $422,900 from $360,000 in the year-ago quarter. The same from Harsh Environment floaters, however, decreased to $367,900 from $376,000 in the comparable period of 2023.

The fleet utilization rate was 53.7%, up from the prior-year period’s figure of 51.9%.

Transocean’s backlog of $8.9 billion decreased sequentially from $9.01 billion.

Costs, Capex & Balance Sheet

Operations and maintenance (O&M) costs increased to $523 million from $409 million reported a year ago. The company spent $83 million on capital investments in the first quarter. Cash used in operating activities totaled $86 million.

Cash and cash equivalents amounted to $446 million as of Mar 31, 2024. Long-term debt totaled $6.8 billion, with a debt-to-capitalization of 39.3% as of the same date.

Guidance

RIG projects O&M expenses of approximately $570 million for the second quarter. This quarter-over-quarter increase is primarily driven by increased activities associated with the four rigs, as well as an increase in in-source maintenance costs.

General and administrative costs are estimated to be $60 million. This sequential increase is primarily due to transaction fees or debt financing, debt refinancing, and an earlier retirement program offered to long-term employees.

The company expects a net interest expense of $138 million for the second quarter. This includes an estimated $8 million in capitalized interest.

Projected capital expenditures for the second quarter are $92 million, with about $55 million allocated for the preparation of Deepwater Aquila for its 3-year contract with Petrobras PBR in Brazil. Cash taxes are expected to total $17 million.

The company expects adjusted revenues to be at the lower end of the range, around $3.6 billion. This includes approximately $215 million in additional services and reimbursement expenses.

The company anticipates annual O&M expenses of $2.2-$2.3 billion. The company anticipates G&A costs of $210 million.

Transocean's projected year-end 2024 liquidity is $1.4 billion. This includes the $575 million capacity of its newly amended, extended and undrawn revolving facility. It also includes approximately $395 million of restricted cash, most of which is reserved for specific services.

For 2024, Transocean anticipates capital expenditures (CapEx) of $231 million. This breakdown includes $134 million specifically allocated to the Deepwater Aquila and $97 million for ongoing maintenance and contract preparation.

Important Energy Earnings so far

While it's still early in the earnings season, there have been a few key energy releases so far. Let’s take a look at these stocks.

SLB SLB, the largest oilfield contractor, announced first-quarter 2024 earnings of 75 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 74 cents. The bottom line also increased from the year-ago quarter’s level of 63 cents.

SLB’s strong quarterly earnings resulted from higher evaluation and stimulation activities in the international market. As of Mar 31, 2024, the company had approximately $3.5 billion in cash and short-term investments. It had a long-term debt of $10.7 billion at the end of the quarter.

Energy infrastructure provider Kinder Morgan KMI reported first-quarter adjusted earnings per share of 33 cents, a penny above the Zacks Consensus Estimate. The bottom line was favorably affected by increased financial contributions from the Natural Gas Pipelines, Products Pipelines and Terminals business segments. Moreover, KMI’s first-quarter discounted cash flow (DCF) totaled $1.42 billion, up from $1.40 billion reported a year ago.

As of Mar 31, 2024, Kinder Morgan reported $119 million in cash and cash equivalents. Its long-term debt amounted to $30.1 billion as of the same date. For full-year 2024, KMI anticipates a DCF of $5 billion ($2.26 per share) and an adjusted EBITDA of $8.16 billion, each indicating 8% growth from the previous year’s reported figures.

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Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report

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