By David Wethe
(Bloomberg) — Transocean Ltd.’s profit dwindled in the second quarter as the world’s largest offshore driller struggles to win contracts and keep rigs busy during an oil industry downturn.
Net income fell to $77 million, or 21 cents a share, from $342 million, or 93 cents, a year earlier, the company based in Vernier, Switzterland, said Wednesday in a statement. Excluding one-time items, the 17-cent per-share profit was better than the average 2-cent loss estimated by 33 analysts surveyed by Bloomberg.
Offshore rig contractors have been among the hardest hit in the industry, with customers slashing spending while new drilling vessels continue to enter an oversupplied market. Transocean announced on Monday it agreed to buy out the public stakes in Transocean Partners LLC for $249 million in an effort to cut costs and boost liquidity.
“Utilization is still declining at almost 5 percent per quarter, and contracting is essentially next to zero,” Marc Edwards, chief executive officer at Diamond Offshore Drilling Inc., told analysts and investors Monday on a conference call. “Before we can declare a bottom, we at least need to see a level of fixture awards that matches a number of contracts that are reaching the end of their term. And for our industry sector, this has yet to happen.”
Brent crude, the global benchmark, is still down by more than half since the downturn began in the middle of 2014. Roughly around the same time that oil prices began falling, Transocean announced plans to create Transocean Partners, selling stakes in three deepwater rigs for the tax-free partnership.
“Transocean Partners was formed so that Transocean would be able to monetize drilling contracts by selling the ownership interests,” Andrew Cosgrove, analyst at Bloomberg Intelligence, said in an interview. “Under the current conditions, it’s not economic to use Transocean Partners for the reason it was created.”
The earnings were released after the close of regular trading in New York.
(Transocean is scheduled to hold an earnings conference call Thursday at 9 a.m. New York time, accessible at EVTS.)
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