Transocean Expects Steady Improvement Through 2001
Transocean Sedco Forex is a leading international provider of deepwater and harsh environment contract drilling services for oil and gas wells. The company’s active fleet consists of 12 high-specification semisubmersibles, 29 second- and third-generation semisubmersibles, two Discoverer Enterprise-class drillships, four other drillships, 17 jackup rigs and three tenders.
The company has under construction one Discoverer Enterprise-class drillship and three Sedco Express- class semisubmersibles. In addition, the fleet includes one mobile offshore production unit, six swamp barges and two land drilling rigs.
In January 2001, the company completed the acquisition of R&B Falcon Corp., which operates a fleet of 139 marine-based drilling rigs. On Feb. 13, the company announced management change and promotions. Jon C. Cole was named Executive Vice President, Shallow and Inland Water Operations, overseeing the company’s presence in the shallow and inland waters of the U.S. drilling market. Cole joined the company in 1977 in Corporate Planning and has since held a number of management roles in the company’s Operations and Marketing departments, including Division Manager in Egypt and Scotland and Senior Vice President of European Operations. Prior to his new assignment, Cole held the position of Executive Vice President, Marketing. He is a graduate of the University of Virginia in Charlottesville, Va., where he received a bachelor’s degree in chemistry and an M.B.A. Cole currently serves as a director of the International Association of Drilling Contractors and is a member of the Society of Petroleum Engineers. In addition, the company announced the following promotions: Donald R. Ray has been named Executive Vice President, Technical Services; Eric B. Brown has been named Senior Vice President, General Counsel and Corporate Secretary; Jeffrey L. Chastain has been named Vice President, Investor Relations and Communications; Robert J. Scott has been named Vice President, Operations Support Manager, Operations and Michael I. Unsworth has been named Vice President, Marketing.
On Jan. 30 Transocean announced that the net income for the three months ended December 31, 2000 was $33.0 million before the effect of dispute-related, after-tax charges totaling $42.2 million. The charges relate principally to the previously announced $37.2 million provision pertaining to the settlement of a terminated bareboat charter agreement and a $4.8 million provision for legal claims. After accounting for the dispute-related charges, the company reported a net loss for the three months ended December 31, 2000 of $9.2 million on revenues of $314.9 million. During the corresponding three months of 1999, Transocean Sedco Forex reported a net loss of $12.4 million on revenues of $131.4 million.
The December 1999 merger of Transocean Offshore Inc. and Sedco Forex Holdings Limited (Sedco Forex) was accounted for as a purchase, with Sedco Forex as the acquiror for accounting purposes. Accordingly, results for the three and 12 months ended Dec. 31, 1999, reflect Sedco Forex historical results only and exclude historical results of Transocean Offshore Inc.
For the 12 months ended December 31, 2000, net income totaled $108.5 million. The results include net after-tax charges of $17.3 million, relating primarily to the previously mentioned settlement of a terminated bareboat charter agreement and provisions for legal disputes, partially offset by a cash settlement relating to the early termination of a rig contract, the sale of two rigs and an extraordinary gain relating to the early termination of certain debt. Full year 2000 revenues totaled $1,229.5 million. The results compare to net income of $58.1 million on revenues of $648.2 million in the corresponding 12 months in 1999.
Utilization of the fleet was a pro forma 69 percent during the corresponding three months in 1999. The company’s fleet of 42 fully owned or chartered and active semisubmersibles and drillships (floaters) experienced a utilization level of 74 percent during the final three months of 2000, compared to 84 percent and a pro forma 71 percent utilization level during the previous quarter in 2000 and the same three months in 1999, respectively.
The average dayrate for the company’s 62 fully owned and active mobile offshore drilling units was $71,500 during the three months ended December 31, 2000, improving from $67,200 during the preceding three months in 2000, but below the pro form a $77,300 average dayrate experienced during the corresponding three months in 1999. The average dayrate for the company’s 42 fully owned or chartered and active floaters was $87,800, compared to $81,400 and a pro forma $96,500 during the three months ended September 2000 and December 1999, respectively.
J. Michael Talbert, President and CEO of Transocean Sedco Forex, said, “Operating results for the fourth quarter of 2000 were impaired by several events, including planned and unplanned downtime affecting our active fleet, seasonal weakness in the U.K. sector of the North Sea, a sluggish floater market in Asia, and continued delays associated with the activation of newbuild rigs. The rigs that contributed to an estimated 179 days of planned and unplanned downtime in the quarter have returned to active status. However, the seasonal weakness in the U.K. sector of the North Sea and fragile floater market in Asia are expected to continue until late in the first quarter of 2001. In addition, during 2001, 13 rigs within the 71-rig Transocean Sedco Forex mobile offshore drilling fleet, are currently expected to experience downtime while in shipyards, undergoing planned maintenance and upgrading. Six of these rigs are expected to experience downtime ranging from 20 to 90 days each during the first quarter of 2001, causing a temporary reduction in fleet utilization.”
Addressing the outlook for the offshore drilling industry and near- to medium-term prospects for Transocean Sedco Forex, Talbert said, “We continue to expect a steady improvement in our industry through 2001 as our customers increase exploration and production spending plans in response to record cash flows generated by favorable crude oil and natural gas pricing. The higher spending levels are expected to be most evident in the offshore markets outside of North America, where spending was severely curtailed in 2000, and in the gas-intensive, shallow water U.S. Gulf of Mexico. Recent discussions with customers have resulted in firm contracts, contract extensions or letters of intent which are expected to become firm contracts on several rigs in the company’s fleet and are evidence of the rising spending plans of our global customer base. The contract developments, which are valued at an estimated combined $67 million, involve the jackup rigs Transocean Nordic and Trident 15, in Norway and Thailand, respectively, the semisubmersible Sovereign Explorer in the U.K. and the semisubmersibles Transocean Amirante and Transocean Richardson in the U.S. Gulf of Mexico.’’
