Transocean Profit Beats Estimates After Controlling Costs

Transocean Ltd. (RIG), the world’s largest offshore-rig contractor, reported first-quarter profit that beat analysts’ estimates as maintenance costs rose less than expected.

Net income fell to $42 million, or 12 cents a share, from $310 million, or 96 cents, a year earlier, the Vernier, Switzerland-based company said in a statement today.

Excluding $184 million in charges mostly related to a goodwill expense, the company earned 64 cents a share, 32 cents more than the average of 31 analysts’ estimates compiled by Bloomberg. Sales climbed 8.7 percent to $2.3 billion.

“The beat was really driven more by controlling their operating and maintenance costs this quarter a little better,” Brian Youngberg, an analyst at Edward Jones in St. Louis, who rates the shares a hold and owns none, said today in a telephone interview. “That was a big issue for them in the second half of last year. Getting that fixed is definitely a step in the right direction.”

Total operating and maintenance costs increased 3.8 percent to $1.4 billion. Youngberg said he was expecting the costs to be in the range of $1.5 billion to $1.6 billion.

The number of rigs operating in the U.S. Gulf of Mexico climbed 62 percent to an average of 42 during the first quarter from 26 a year earlier, according to Baker Hughes Inc. (BHI)

Producers and explorers chasing oil at more than $100 per barrel have been pushing up rig demand.

Rates Seen Rising

Rental rates for the industry’s ultra-deepwater rigs, the world’s most complex and expensive drilling vessels, should climb 28 percent to a record $714,000 a day by the third quarter from about $560,000 currently, according to estimates by Ole Slorer, an analyst at Morgan Stanley who dubs the move a “super spike.”

The company’s total out-of-service costs are expected to drop $500 million this year compared to 2011, Chief Financial Officer Greg Cauthen said on a Feb. 27 conference call.

Transocean owned the $365 million Deepwater Horizon rig that was destroyed in the BP Plc (BP/) oil spill in the Gulf of Mexico. The company employed nine of the 11 workers who died in the April 2010 disaster.

The earnings results were released after the close of regular trading on U.S. markets. Transocean fell 1.6 percent to $49.93 at the close in New York.

(Transocean scheduled a conference call to discuss first- quarter results for 10 a.m. New York time tomorrow. To access the call, go to http://www.deepwater.com.)

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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