May 4 (Bloomberg) -- Transocean Ltd., the world’s largest offshore driller, reported its biggest first-quarter profit decline in nine years amid a wordwide surfeit of rigs used to find oil and natural gas.
Net income declined 54 percent to $310 million, or 96 cents a share, from $677 million, or $2.09, a year earlier, the Vernier, Switzerland-based company said today in a statement. The last time Transocean reported a larger first-quarter profit decrease was 2002.
Excluding one-time gains and expenses stemming from rig sales, legal bills and tax items, the per-share result was 24 cents below the average estimate of 35 analysts in a Bloomberg survey. New U.S. drilling rules enacted after last year’s Deepwater Horizon disaster in the Gulf of Mexico boosted costs and forced the company to spend more time carrying out shipyard work during the quarter, according to Transocean’s statement.
The results were “substantially below expectations,” said Kurt Hallead, an analyst at RBC Capital Markets Corp. in Austin, Texas, who has an “outperform” rating on Transocean. “It doesn’t look all too pretty.”
Transocean and other drillers have been idling rigs after a building boom expanded global inventories at a faster rate than demand grew. Less-sophisticated rigs unequipped to operate in harsh seas or extreme cold have been hardest hit as energy explorers extend their search to more remote regions of the world.
Falling rig demand left 45 percent of Transocean’s entire fleet idle during the first three months of this year, down from 34 percent a year earlier, according to the statement. Sales fell 17 percent to $2.14 billion.
Daily rates for the company’s vessels fell in four of seven asset classes, led by a 35 percent decline for so-called jack-up rigs to $106,200. Jack-ups have retractable legs that extend a few hundred feet to the seafloor to support the rig.
The statement was released after the close of regular trading on U.S. exchanges. Transocean fell $1.31, or 1.9 percent, to $67.15 at 4:48 p.m. Transocean has missed analysts’ estimates in three of the past four quarters.
Before today’s announcement, Transocean had fallen 9.5 percent since BP Plc filed a lawsuit on April 20 seeking billions of dollars in damages for the driller’s role in last year’s fatal Deepwater Horizon disaster in the Gulf of Mexico. Transocean owned the rig and employed nine of the 11 workers killed when BP’s Macondo well erupted into the worst U.S. offshore oil spill.
The stock has 22 buy ratings, 22 sells and four holds.
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