Transocean Ltd. (NYSE: RIG) yesterday reported a net loss attributable to controlling interest of $497 million, $0.81 per diluted share, for the three months ended June 30, 2020.
Second quarter 2020 results included net unfavorable items of $496 million, or $0.81 per diluted share, as follows:
• $430 million, $0.70 per diluted share, loss on impairment of assets
• $59 million, $0.10 per diluted share, loss on impairment of an investment in an unconsolidated affiliate
• $10 million, $0.02 per diluted share, related to discrete tax items; and
• $1 million in restructuring costs.
These unfavorable items were partially offset by:
• $4 million, $0.01 per diluted share, gain on retirement of debt.
After consideration of these net unfavorable items, second quarter 2020 adjusted net loss was $1 million.
Contract drilling revenues for the three months ended June 30, 2020, increased sequentially by $171 million, primarily due to $177 million of revenues recognized in second quarter 2020, resulting from a settlement agreement with a customer for performance disputes.
Additionally, the second quarter was favorably impacted by higher revenue efficiency, and an early termination fee of $21 million for Paul B. Loyd Jr., offset by lower revenues due to reductions in dayrates and a non-cash revenue reduction of $53 million, compared to $48 million in the prior quarter, from contract intangible amortization associated with the Songa and Ocean Rig acquisitions.
Operating and maintenance expense was $525 million, compared with $540 million in the prior quarter. The sequential decrease was the result of lower in-service maintenance cost across our fleet, partially offset by $30 million of higher costs related to the COVID-19 pandemic.
General and administrative expense was $45 million, as compared to $43 million in the first quarter of 2020.
Interest expense, net of amounts capitalized, was $153 million, compared with $160 million, in the prior quarter. Interest income was $4 million, compared with $9 million in the previous quarter.
The Effective Tax Rate(2) was (6.8)%, down from 1.1% in the prior quarter. The decrease was primarily due to various discrete period tax items, including revenues recognized for settlement of disputes. The Effective Tax Rate excluding discrete items was (15.0)% compared to (9.5)% in previous quarter.
Net cash provided by (used in) operating activities were $87 million, compared to $(48) million in the prior quarter. The second quarter cash provided by operating activities increased primarily due to collections of certain receivables and decreased income tax payments.
Second quarter 2020 capital expenditures of $46 million decreased primarily due to reduced expenditures for our newbuild rigs under construction. This compares with $107 million in the previous quarter.
“I recognize and thank the entire Transocean team for producing strong second quarter operating and financial results during these unprecedented times,” said Jeremy Thigpen, President and Chief Executive Officer. “Our revenue efficiency of 97% demonstrates our unwavering commitment to delivering reliable and efficient operations for our customers, while keeping personnel on our rigs safe and healthy.”
Thigpen added, “Furthermore, we are excited to have secured a contract, subject to a final investment decision by our customers, that will result in upgrading Deepwater Atlas into the industry’s second 20,000 PSI ultra-deepwater drillship. This contract is meaningful as it moves us closer towards securing backlog for our remaining newbuild drillship, and clearly demonstrates our customer’s confidence in Transocean as the undisputed leader in ultra-deepwater drilling.”
Non-GAAP Financial Measures
We present our operating results in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP). We believe certain financial measures, such as Adjusted Contract Drilling Revenues, EBITDA, Adjusted EBITDA and Adjusted Net Income, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We believe that such non-GAAP measures, when read in conjunction with our operating results presented under U.S. GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. Such non-GAAP measures should be considered as a supplement to, and not as a substitute for, financial measures prepared in accordance with U.S. GAAP.
All non-GAAP measure reconciliations to the most comparative U.S. GAAP measures are displayed in quantitative schedules on the company’s website at: www.deepwater.com.