Transocean Ltd. reported a net loss attributable to controlling interest of $37 million, $0.06 per diluted share, for the three months ended December 31, 2020.
Fourth quarter 2020 results included net favorable items of $172 million, or $0.28 per diluted share, as follows:
- $137 million, $0.22 per diluted share, gain on retirement of debt; and
- $37 million, $0.06 per diluted share, related to discrete tax items, partially offset by:
- $2 million of other net unfavorable items.
After consideration of these net favorable items, fourth quarter 2020 adjusted net loss was $209 million, $0.34 per diluted share.
Contract drilling revenues for the three months ended December 31, 2020, decreased sequentially by $83 million to $690 million, primarily due to reduced activities for two rigs that were idle, one rig that demobilized from Canada to Norway and two rigs undertaking out-of-service maintenance in Brazil.
A non-cash revenue reduction of $57 million was recognized in both the fourth and third quarters as a result of contract intangible amortization associated with the Songa and Ocean Rig acquisitions.
Operating and maintenance expense was $465 million, compared with $470 million in the prior quarter. The sequential decrease was primarily the result of decreased activity partially offset by higher in-service maintenance costs, out-of-service costs for the two rigs in Brazil, and a $20 million increase in our allowance for excess materials and supplies.
General and administrative expense was $50 million, up from $45 million in the third quarter of 2020. The increase was primarily due to legal, professional and advisory fees.
Interest expense, net of amounts capitalized, was $117 million, reduced from $145 million, primarily as a result of our debt exchanges in the third quarter and debt repurchases in the fourth quarter. Interest income was $2 million, compared with $6 million in the previous quarter.
The Effective Tax Rate(2) was (147.9)%, down from (7.0)% in the prior quarter. The decrease was primarily due to benefits derived from the CARES Act and favorable changes in tax rates for various jurisdictions, partially offset by lower earnings before taxes due to a gain on debt restructuring booked in the prior quarter. The Effective Tax Rate excluding discrete items was (39.9)% compared to (45.6)% in previous quarter.
Net cash provided by operating activities was $278 million, compared to $81 million in the prior quarter. The fourth quarter cash provided by operating activities increased primarily due to collections of certain receivables and decreased income tax payments, payments to suppliers and interest payments.
Fourth quarter 2020 capital expenditures of $47 million were primarily related to our newbuild drillships under construction coupled with capital upgrades for certain rigs in our fleet. This compares with $65 million in the previous quarter.
“I would like to recognize and thank the entire Transocean team for once again producing solid operating and financial results in the fourth quarter,” said President and Chief Executive Officer Jeremy Thigpen. “In the face of unprecedented challenges, we generated revenue efficiency of 97%, clearly demonstrating our commitment to delivering reliable and efficient operations for our customers, while keeping personnel on our rigs healthy and safe.”
Thigpen added: “As a direct result of our strong performance in 2020, we generated over $1 billion in EBITDA, which, when combined with the multiple financing transactions consummated throughout the year, further bolstered our liquidity position. This liquidity, coupled with our industry-leading $7.8 billion backlog, provides us the financial stability to continue to invest in our people, the maintenance of our assets, and the development and deployment of new technologies that will further differentiate us in the eyes of our customers and shareholders.”
“Looking forward, we are mindful of the various challenges facing us; however, we believe that improving longer-term market fundamentals, and the increasing list of opportunities on the horizon bode well for an improvement in contracting activity later this year and into next.”
Full Year 2020
For the year ended December 31, 2020, net loss attributable to controlling interest totaled $567 million, or $0.92 per diluted share. Full year results included $101 million, or $0.16 per diluted share, net unfavorable items listed as follows:
- $597 million, $0.97 per diluted share, loss on impairment of assets,
-;$62 million, $0.10 per diluted share, loss on impairment of investments in unconsolidated affiliates,
- $61 million, $0.10 per diluted share, loss on disposal of assets; and
- $5 million, $0.01 per diluted share, in restructuring costs, including severance.
These unfavorable items were partially offset by:
- $533 million, $0.87 per diluted share, gain on restructuring and retirement of debt; and
- $91 million, $0.15 per diluted share, related to discrete tax items.
After consideration of these net unfavorable items, adjusted net loss for 2020 was $466 million, $0.76 per diluted share.
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.