Transocean Reports Q1 Financials

Transocean Reports Q1 Financials


Transocean Ltd.

Transocean Ltd. on Wednesday reported net income attributable to controlling interest of $310 million, or $0.96 per diluted share, for the three months ended March 31, 2011. The results compare to net income attributable to controlling interest of $677 million, or $2.09 per diluted share for the three months ended March 31, 2010.

First quarter 2011 results included the following items, after tax, that resulted in a net positive impact of approximately $139 million, or $0.43 per diluted share:

-- $176 million of income from discontinued operations, nearly all of
which is from the gain on the sale of the Trident 20,
-- $9 million from the gain on the sale of the Transocean Mercury,
-- $8 million of net charges related to litigation matters not associated with the Macondo well incident, and
-- $38 million of net charges primarily related to discrete tax items.


First quarter 2011 results also included expenses associated with the Macondo well incident of $23 million, $19 million after tax, or $0.06 per diluted share. These expenses were primarily related to increased insurance premiums and legal costs.

Operations Quarterly Review

Revenues for the three months ended March 31, 2011 were $2.144 billion, compared to revenues of $2.127 billion during the three months ended December 31, 2010. First quarter contract drilling revenues were impacted by lower utilization and revenue efficiency. Our Deepwater and Midwater Floater fleets experienced lower utilization due to the stacking of rigs, as well as increased shipyard time related to contract preparation, special periodic surveys and major maintenance projects. Compliance with new well control equipment certification requirements, higher standards for equipment condition and capacity constraints on our vendors contributed to reduced revenue efficiency among our Ultra-Deepwater and Deepwater Floaters. Partially offsetting lower contract drilling revenue was additional revenue from two newbuild rigs commencing operations. Other revenues increased primarily from additional drilling management services activity.

Operating and maintenance expenses totaled $1.359 billion for the first quarter 2011, up slightly from $1.339 billion for the prior quarter. The change was due to increased drilling management services activity, which was partially offset by reduced rig-related maintenance costs.

Depreciation and amortization expense was $354 million in the first quarter 2011 compared to $381 million in the prior quarter. The $27 million decrease was primarily due to the reduced carrying amounts of our Standard Jackups resulting from the approximately $1 billion asset impairment recognized on that asset group during the fourth quarter 2010.

Liquidity and Interest Expense

Interest expense, net of amounts capitalized for the first quarter 2011, was $145 million, compared to $152 million in the fourth quarter 2010.

Cash flow from operating activities decreased to $390 million for the first quarter 2011 compared to $796 million for the fourth quarter 2010. The decline in cash flow from operations resulted primarily from an increase in working capital.

Effective Tax Rate

Transocean's Annual Effective Tax Rate(1) for the first quarter 2011, which excludes various discrete items, was 19.3 percent. The Effective Tax Rate(2) for the first quarter was 33.1 percent, primarily reflecting the impact of discrete items resulting from changes in estimates.

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S&P Launches Oil Hedged Index

S&P Launches Oil Hedged Index

Standard & Poor's

S&P Indices announced Wednesday the launch of the S&P 500 Oil Hedged Index, calculated as a combination of a long S&P 500 position overlaid with long positions in NYMEX Oil futures and ICE Brent Crude Oil futures.

The S&P 500 Oil Hedged Index seeks to reduce the effects of a rise in inflation, as reflected in higher oil prices, or against declines in the value of the U.S. Dollar by simulating the returns of an investment strategy that is long the S&P 500 and hedged against changes in the U.S. Dollar, as measured by oil prices. By holding long oil futures contracts, investors may benefit from an increase in oil prices or potentially sustain losses when the opposite occurs.

The Index uses NYMEX Crude Oil and ICE Brent Crude Oil futures as a hedge. The hedge position has 50% in NYMEX Crude Oil and 50% in ICE Brent Crude Oil at the close of each rebalancing day. The hedge only protects against adverse movements in the relative value of the U.S. Dollar, as expressed in the dollar price of oil. Stock market risk is not hedged in any way.

"Investors are increasingly looking for alternative methods to hedge against inflationary risk during this period of global economic uncertainty," says Alka Banerjee, Vice President at S&P Indices. "We would expect funds that replicate returns on the S&P 500 Oil Hedged Index to provide investors with a means to mitigate the potential negative impact on an investor's portfolio resulting from a rise in inflation or decline in the U.S. Dollar."

The S&P 500 Oil Hedged Index belongs to the S&P U.S. Index family. Other closely related S&P indices include British Pound, Canadian Dollar, Euro, Yen, and Gold hedged S&P 500 indices.

S&P Indices, a world leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1.25 trillion is directly indexed to Standard & Poor's family of indices, which includes the S&P 500, the world's most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry's most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds.

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BME UK Announces West Africa Contract Win

BME UK Announces West Africa Contract Win

BME UK

BME UK on Wednesday announced a contract worth GBP500,000 for the provision of its Specialised Machinery And Reduced flow Technology (SMART) in West Africa.

The company which designs and manufactures engineering equipment for the construction, marine and oil and gas industries will deploy seven of its personnel from Aberdeen, to carry out the work in the Bonga Field in Nigeria. This landmark deal follows the award of two further contracts with Hunting Energy Services International Ltd and BIS Salamis, both of which will be delivered by BME's operations in Aberdeen.

Scot Borland, director of BME UK comments, "The contract win in West Africa has been achieved in conjunction with local our partner, GCA. The work on the Bonga Field will utilise our revolutionary SMART system, to undertake deep tank and vessel cleaning. We have specially designed this technology to deliver outstanding results while reducing the waste, which deep tank and vessel cleaning produces; in some cases the level of waste is reduced by as much as 80%.

"Seven people from Aberdeen will travel to Nigeria to install and operate the SMART equipment. Training provision also forms part of the contract scope and six West African nationals will receive on-site training."

Aberdeen based Hunting Energy Services International Ltd will also be using BME UK's SMART system. Scot continues, "We have been awarded a contract by energy services provider Hunting Energy Services (Well Intervention) Ltd. This will be fulfilled from our offices in Aberdeen and is for the provision of a containerised ultra high pressure jetting unit and associated training."
Additionally the company has been contracted to undertake activity for leading international industrial services firm, BIS Salamis with the award of an order for the provision of six vertical air receiver frames.

Scot continues, "The technologies we supply are designed to provide results of the highest quality whilst having the added benefit of producing lower amounts of waste. This is therefore better for the environment and helps companies to comply with waste minimisation program requirements. Customers using our SMART system also benefit from lower costs because the amount of contaminated waste products which need to be treated or disposed of is reduced.

"We have recently invested GBP750,000 in the launch of our Specialist Cleaning Services; these initial contract wins validate our decision to make this level of investment and mean that we are well on the way to achieving our target of doubling our turnover to GBP3.4 million."

BME UK designs and manufactures a range of equipment for the construction, marine, oil and gas and decommissioning sectors. This includes decontamination modules for the treatment and disposal of NORM, high pressure fluid pumps for on and offshore use, munchers, handling systems, pipe cleaning systems phosphate systems, heat exchanger and bundle cleaning equipment, as well as traditional spoolers, powerpacks, workshops.

From its headquarters in Aberdeen, BME UK also offers a 24/7 maintenance back up services for clients who own or operate their own water/fluid pumps/pipe handling and cleaning systems. BME's skilled engineers have a wealth of knowledge on a range of pumps and work in global locations. Specialised Cleaning Services, a division of BME UK, provides full bundle cleaning services including surface preparation, internal and external pipe cleaning, drain cleaning, vessel cleaning and shutdown, waste removal and decommissioning services for global operators.

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ABS Unveils New Standards for MODU Operators

ABS Unveils New Standards for MODU Operators

American Bureau of Shipping

The increased technical sophistication of drill ships and other mobile drilling units, coupled with the greater regulatory oversight of offshore drilling, has spurred ABS to develop a new suite of classification standards and notations intended to provide MODU operators with increased confidence that their operations are being conducted to the highest demonstrable standards.

"ABS is the leading provider of classification services to the offshore sector," said ABS President and CEO Christopher J. Wiernicki. "We have been talking with the industry, regulators and others with related interests. This has helped us to clearly define existing standards that can be improved, and to also identify those new areas that would benefit from having an independent, third party set of standards that properly address the new technologies that are being incorporated into the latest designs of drillships, semis and jackups."

That research has indicated a broad range of both design and operational aspects that warrant additional guidance, according to Ken Richardson, ABS Vice President, Energy Development. "Obviously enhanced standards for the classification of drilling systems are key components," he noted, "but operators are also looking for a more holistic approach to the maintenance of their assets and we have developed new notations that can be used by an operator to demonstrate the effectiveness of their maintenance programs."

Richardson also emphasized the need, expressed by many of the ABS MODU operators for an effective independent standard that addresses the integration of the ubiquitous, and increasingly complex, software programs that are essential for the operation of the unit as a whole. "The offshore sector has always been a leader in developing and adopting new technologies and novel concepts," Richardson added. "There is a lot of innovative thinking that goes into the development of the individual components that are brought together in the modern drillship. The key to the safe and seamless operation of the unit is the ability of all these components to function together in a manner that can be controlled by the operational team on board. That is the basis of a lot of our research and the development of our new software notations."

New notations that have been developed by ABS for the drilling sector include Integrated Software Quality Management (ISQM), Systems Verification (SV), DRILLSHIP, Asset Integrity Management (AIM) and Rapid Response Damage Assessment (RRDA). Existing notations that have been enhanced include Classification of Drilling Systems (CDS), Hull Inspection and Maintenance Program (HIMP), Reliability Centered Maintenance (RCM), and Environmental Protection (ENVIRO-OS).

ISQM is a risk-based software development and maintenance process built on internationally recognized standards. The ISQM process validates the software installation on the unit and then monitors for consistency when there are software updates or a change in hardware. ISQM provides a process to manage software over the offshore unit's life.

"There is growing recognition within industry that organizations will need to institute a change management process for software," says Bret Montaruli, ABS Vice President, Offshore Technology. "Industry has traditionally focused on structures and equipment. However, software has become such an important component in the operational phase particularly since control systems for offshore installations and units become more complex. Successful implementation relies heavily on the integration of software developed by multiple vendors." The ABS ISQM Guide places emphasis on the verification and validation of the multiple software packages. The benefit to owners and operators is an increased level of confidence in software reliability with the goal of decreasing downtime and reducing the risk of software related incidents."

The SV notation allows operators to benefit from verifying that the software has been developed in a recognized process that meets the operator's needs and performs as expected. Upgrades and new releases that are routinely made by vendors and which may introduce errors into the system and increase downtime or cause other operating problems are also subject to verification prior to installation.

Award of the DRILLSHIP notation indicates that the vessel has been designed and constructed to the standards contained in the Guide for Drillships. As the principal class society for drillships, ABS is taking the lessons learned and is clarifying the criteria for these specialized vessels.

Asset Integrity Management is a concept that is well established within the offshore sector and has received renewed attention. "Operators are looking for third party confirmation that the day to day maintenance and management of their units conforms to a clear, industry accepted standard and the new ABS AIM notation provides them with such verification," says Richardson. "It builds on the existing Hull Inspection and maintenance Program (HIMP) requirements that several operators have adopted, taking a more holistic approach to the overall management of the MODU." A key element of this is the addition of a state-of-the-art loads and configuration approach that provides the operator with a tool to better understand the operational loads to which the unit is subject.

While HIMP is directed at the inspection and maintenance of the unit's structure, the companion Reliability Centered Maintenance (RCM) notation addresses the manner in which the machinery and equipment on board the unit is maintained, including replacement and repair strategies that are pre-emptive in their approach.

The ABS RRDA program and notation is a well established offering within the shipping industry and has now been enhanced and made available to offshore operators. "The technical assessment of an offshore structure can be much more complex than for a ship such as a tanker," explains ABS Chief Technology Officer Todd Grove. "Many offshore units are unique in their architecture so that the necessary modeling of the unit is similarly complex and the programs must be specifically tailored to the unit. Incidents affecting offshore units over the recent past have highlighted the importance of having the ability to quickly evaluate the unit in the damaged condition so that pro-active response strategies can be implemented that may be able to stabilize the situation preventing or minimizing the possibility of loss of life or ensuing pollution."

ABS has offered the voluntary CDS notation for many years. ABS has revisited the standards with industry and other interested parties to identify those areas that should be strengthened or clarified. The newly issued Guide for the Classification of Drilling Systems includes these enhanced standards and takes a more holistic approach to the entire drilling system from the drill floor to the wellhead including the blow out preventer.

The ENVIRO-OS or ENVIRO-OS+ denotes adherence to enhanced standards for environmental protection. The notation takes into account procedures and requirements for ballast water and sewage management, anti-fouling applications, airborne pollutant discharges, fuel oil and the use of exhaust gas cleaning systems, refrigerants and the Green Passport for ship recycling.

Founded in 1862, ABS is a leading international classification society devoted to promoting the security of life, property and the marine environment through the development and verification of standards for the design, construction and operational maintenance of marine-related facilities.

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