Transocean Loss Narrower Than Estimates in Q1, Revenues Beat

Transocean Ltd. RIG reported a first-quarter 2025 adjusted net loss of 10 cents per share, narrower than the Zacks Consensus Estimate of a loss of 12 cents. However, the bottom line underperformed the year-ago period’s loss of 3 cents per share. This underperformance can be attributed to higher costs and expenses.

This Switzerland-based offshore drilling powerhouse’s total adjusted revenues of $906 million beat the Zacks Consensus Estimate of $886 million. The top line also increased 18.7% from the prior-year figure of $763 million. This improvement can be attributed to improved revenues from ultra-deepwater and harsh environment floaters, improved revenue efficiency, high average revenues per day from its segments and higher than expected utilization of its Spitsbergen and Endurance rigs. Ultra-deepwater and harsh environment contract drilling revenues surpassed the respective consensus mark of $635 million and $202 million.

Transocean Ltd. Price, Consensus and EPS Surprise

 

Transocean Ltd. price-consensus-eps-surprise-chart | Transocean Ltd. Quote

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Transocean’s Segmental Revenue Breakup

Transocean’s ultra-deepwater floaters contributed 73% to net contract drilling revenues, while harsh environment floaters accounted for the remaining 27%.

Revenues from the ultra-deepwater and harsh environment floaters totaled $658 million and $248 million, respectively, compared with the year-ago quarter’s reported figures of $569 million and $194 million. The reported revenues from ultra-deepwater missed our model prediction of $661.9 million. However, the revenues from harsh environment operations topped the model prediction of $223.5 million.

Revenue efficiency was 95.5%, a sequential increase from the previous quarter's 93.5%. This was also higher than the year-ago quarter’s 92.9%.

RIG’s Day Rates, Utilization & Backlog

Average day rates in the reported quarter increased to $443,600 from $408,200 in the year-ago quarter. However, the figure missed the model prediction of $446,300.

Average revenues per day from ultra-deepwater floaters increased to $443,600 from $422,900 in the year-ago quarter. However, the figure missed the model estimation of $445,100.

The same from harsh environment floaters also increased to $443,600 from $367,900 in the comparable period of 2024. Moreover, the figure missed the model prediction of $449,900.

Fleet utilization rate was 63.4% in the quarter, which increased from the prior-year period’s 53.7%.

As of April 2025, Transocean’s total backlog stood at $7.9 billion.

RIG’s Costs, Capex & Balance Sheet

This Zacks Rank #3 (Hold) company reported $844 million in costs and expenses, which was 11% higher than the year-ago quarter’s $760 million.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Operating and maintenance expenses (O&M) rose to $618 million from $523 million reported a year ago. However, General and Administrative expenses (G&A) reduced to $50 million from the prior-year figure of $52 million. The depreciation and amortization expenses also got reduced to $176 million from the prior-year figure of $185 million.

The oil and gas drilling company spent $60 million on capital investments in the first quarter. Cash used in operating activities was $26 million. It generated a negative free cash flow of $34 million.

Cash and cash equivalents were $263 million as of March 31, 2025. Long-term debt amounted to $5.9 billion, with a debt-to-capitalization of 36.8% as of the same period.

Transocean’s Guidance for Q2 & 2025

The company expects second-quarter contract drilling revenues to be between $970 million and $990 million, which will be based on the average revenue efficiency of 96.5% on its working rigs. The O&M expenses and the G&A expenses in the quarter under discussion are forecasted to be between $610 million and $630 million, and $45 million and $50 million, respectively. The net cash interest expense is expected to be around $140 million, including an interest expense of about $147 million and interest income of $7 million. The capital expenditure for the second quarter is anticipated to be around $20 million and cash taxes are expected to be paid at around $30 million.

For the full year, the company projects its contract drilling revenues to be between $3.85 billion and $3.95 billion. The O&M expense for the year is forecasted to be within the range of $2.3 billion to $2.4 billion, in line with the previous guidance and the G&A expense is anticipated to be between $185 million and $195 million, $5 million lower than the previous guidance. The company expects net interest expense for the year to be between $550 million and $555 million, including an interest expense of about $580 million and interest income in the range of $25-$30 million. Cash taxes for the full year are expected to be between $75 million and $80 million, a little higher than the earlier guidance. The company reduced its full-year capital expenditure guidance from an earlier $130 million to $115 million. At the year-end 2025, the company expects its liquidity to be between $1.45 billion and $1.55 billion.

Important Earnings at a Glance

While we have discussed RIG’s first-quarter results in detail, let us take a look at three other key reports in this space.

Oil and gas equipment and services provider TechnipFMC plc FTI reported first-quarter 2025 adjusted earnings of 33 cents per share, which missed the Zacks Consensus Estimate of 36 cents, primarily due to a 4.8% year-over-year increase in costs and expenses. However, the bottom line increased from the year-ago quarter’s reported profit of 22 cents, driven by improved performance in the Subsea segment.

The company’s revenues of $2.2 billion missed the Zacks Consensus Estimate by 1.1%. However, the top line increased from the year-ago quarter’s reported figure of $2 billion.

As of March 31, FTI had cash and cash equivalents worth $1.2 billion and long-term debt of $410.8 million, with a debt-to-capitalization of 11.8%.

Another oil and gas equipment and services provider, Halliburton Company HAL, posted a fourth-quarter 2024 adjusted net income per share of 70 cents, the same as the Zacks Consensus Estimate but below the year-ago quarter’s profit of 86 cents (adjusted). The numbers indicated softer activity in the region of North America, partly offset by improved fluid work in the Gulf of Mexico.

As of Dec. 31, 2024, the company had approximately $2.6 billion in cash/cash equivalents and $7.2 billion in long-term debt, representing a debt-to-capitalization ratio of 40.4. The company generated $1.5 billion of cash flow from operations in the fourth quarter, leading to a free cash flow of $1.1 billion. 

Houston, TX-based oil and gas equipment and services provider Baker Hughes BKR reported first-quarter 2025 adjusted earnings of 51 cents per share, which beat the Zacks Consensus Estimate of 47 cents. The bottom line also improved from the year-ago level of 43 cents.

As of March 31, 2025, Baker had cash and cash equivalents of $3,277 million. Baker had a long-term debt of $5,969 million at the end of the reported quarter, with a debt-to-capitalization of 25.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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