Transocean LTD (NYSE:RIG) reported net income attributable to controlling interest of $249 million, $0.68 per diluted share, for the three months ended March 31, 2016. First quarter 2016 results included net unfavorable items of $5 million, $0.01 per diluted share, as follows:

  • $4 million, $0.01 per diluted share, in restructuring costs associated with employee severance; and
  • $2 million related to the loss on impairment of the midwater floater Transocean John Shaw, which the company has identified for recycling.

These net unfavorable items were partially offset by:

  • $1 million in favorable discrete tax benefits and miscellaneous other items.

After consideration of these net unfavorable items, first quarter 2016 adjusted net income was $254 million, or $0.69 per diluted share.

For the three months ended March 31, 2015, the company reported a net loss attributable to controlling interest of $483 million, or $1.33 per diluted share. The first quarter of 2015 included net unfavorable items of $881 million, $2.43 per diluted share, associated with losses on the impairment of the deepwater floater asset group and other assets classified as held for sale. After consideration of these net unfavorable items, adjusted net income was $398 million, or $1.10 per diluted share.

Contract drilling revenues for the three months ended March 31, 2016, decreased $345 million sequentially to $1.11 billion due primarily to reduced activity associated with stacked and idle rigs, and rig disposals.

Other revenues decreased $165 million sequentially to $230 million. First quarter 2016 included $209 million in early contract termination fees ($133 million, net of expected quarterly contract drilling revenues for the cancelled rigs) primarily associated with the Discoverer Deep Seas and Deepwater Millennium.

Operating and maintenance expense decreased to $665 million, compared with $794 million in the prior quarter. The decrease was due largely to lower activity, cost savings related to the company’s operational and restructuring initiatives, and reduced stacking costs primarily associated with the company’s dynamically positioned floaters offset partially by the reactivation costs of the Henry Goodrich. The quarter also included deferred mobilization cost of $18 million on the GSF Development Driller I that was previously expected in the second quarter of 2016.

General and administrative expense was $43 million, down from $58 million in the prior quarter reflecting the company’s ongoing restructuring efforts.

Depreciation expense was $217 million, compared with $213 million in the previous quarter.

The Effective Tax Rate(4) was 22.4 percent, up from 9.7 percent in the fourth quarter of 2015. The Annual Effective Tax Rate was 22.8 percent, up from 13.1 percent in the previous quarter. The increase was due largely to lower adjusted pre-tax income and the change in the mix of operating results from certain jurisdictions.

Interest expense, net of amounts capitalized, increased $2 million sequentially to $89 million. Capitalized interest was $49 million, unchanged from the prior quarter. Interest income was $6 million, compared with $5 million in the prior quarter.

Cash flows from operating activities were $631 million, compared with $960 million in the prior quarter.

Capital expenditures totaled $368 million, down from $665 million in the prior quarter. The decline was due primarily to reduced spending associated with the company’s newbuild program.

“Despite the challenging environment, the Transocean team delivered strong operating performance, and solid financial results, adding over $200 million to our cash balance in the first quarter of 2016,” said President and Chief Executive Officer Jeremy Thigpen. “As we work through the second quarter, and the balance of the year, we will continue to prepare ourselves for the eventual industry recovery by taking the necessary steps to both maximize internal efficiencies, and further differentiate Transocean in the eyes of our customers through superior safety and operational performance.” (Original Source)

Shares of Transocean closed today at $10.12, down $0.31 or -2.97%. RIG has a 1-year high of $21.90 and a 1-year low of $7.67. The stock’s 50-day moving average is $9.91 and its 200-day moving average is $11.55.

On the ratings front, Transocean has been the subject of a number of recent research reports. In a report issued on April 22, KLR Group analyst Darren Gacicia reiterated a Buy rating on RIG, with a price target of $19, which represents a potential upside of 87.4% from where the stock is currently trading. Separately, on the same day, Goldman Sachs’ Waqar Syed maintained a Sell rating on the stock and has a price target of $7.25.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Darren Gacicia and Waqar Syed have a total average return of 0.1% and 3.6% respectively. Gacicia has a success rate of 60.7% and is ranked #2288 out of 3838 analysts, while Syed has a success rate of 51.1% and is ranked #1142.

Overall, 4 research analysts have rated the stock with a Sell rating, 4 research analysts have assigned a Hold rating and one research analyst has given a a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $5.92 which is -41.6% under where the stock opened today.

Transocean Ltd. provides offshore contract drilling services for oil and gas wells. The company operates through Contract Drilling Services segment. The Contract Drilling Services segment comprises mobile offshore drilling fleet, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. It operates technically demanding regions of the offshore drilling business with a particular focus on deepwater and harsh environment drilling services. The segment consists of floaters, jack-ups and other rigs used in support of offshore drilling activities and offshore support services on a worldwide basis. The company was founded in 1954 and is headquartered in Vernier, Switzerland.