Transocean Ltd. Reports Second Quarter 2017 Results

Grand Cayman, CAYMAN ISLANDS


  • Revenues were $751 million, compared with $785 million in the first quarter of 2017;

  • Revenue efficiency(1) was 97.4 percent, compared with 97.8 percent in the first quarter of 2017;

  • Operating and maintenance expense was $333 million, compared with $343 million in the prior period;

  • Net loss attributable to controlling interest was $1.690 billion, $4.32 per diluted share, compared with net income attributable to controlling interest of $91 million, $0.23 per diluted share, in the first quarter of 2017;

  • Adjusted net income was $1 million, excluding $1.691 billion of net unfavorable items primarily related to the previously announced $1.597 billion loss on the divestiture of the jackup fleet. This compares with $4 million, $0.01 per diluted share, in the prior quarter, excluding $87 million of net favorable items;

  • Adjusted Normalized EBITDA margin was $347 million or 49 percent, compared with $361 million or 48 percent in the prior quarter;

  • Cash flows from operating activities were $319 million, up from $184 million in the prior quarter;

  • Repurchased an aggregate principal amount of debt of $1.343 billion, including cash tender offers of $1.212 billion and open market repurchases of $131 million primarily associated with near‑dated debt; and

  • Contract backlog was $10.2 billion as of the July 2017 Fleet Status Report.

ZUG, Switzerland, Aug. 02, 2017 (GLOBE NEWSWIRE) -- Transocean Ltd. (NYSE:RIG) today reported net loss attributable to controlling interest of $1.690 billion, $4.32 per diluted share, for the three months ended June 30, 2017.

Second quarter 2017 results included net unfavorable items of $1.691 billion, or $4.32 per diluted share as follows:

  • $1.597 billion, $4.08 per diluted share, loss on the divestiture of the jackup fleet;

  • $113 million, $0.29 per diluted share, loss on impairment of primarily the midwater floater asset group;

  • $48 million, $0.12 per diluted share, loss related to the early retirement of debt; and

  • $3 million associated with unfavorable litigation matters and restructuring charges.

These net unfavorable items were partially offset by:

  • $70 million, $0.17 per diluted share, in discrete tax benefits.

After consideration of these net unfavorable items, second quarter 2017 adjusted net income was $1 million.

Contract drilling revenues for the three months ended June 30, 2017, decreased $33 million sequentially to $705 million due primarily to reduced activity.

Other revenues were $46 million, compared with $47 million in the prior quarter.

Operating and maintenance expense was $333 million, including $4 million in unfavorable items associated with litigation matters and restructuring charges. This compares with $343 million in the prior quarter, including $8 million in favorable items associated with litigation matters. The decrease was due to ongoing cost control initiatives and a favorable adjustment to value added taxes, partially offset by reactivation costs related to the contract preparation on the harsh environment semisubmersible Transocean Barents.

General and administrative expense was $35 million, down from $39 million in the first quarter of 2017.  The decrease was due largely to the reimbursement of legal fees and other costs related to the settlement of a court case.

Depreciation expense was $219 million, down from $232 million in the first quarter of 2017. The decrease was due to the sale of the jackup fleet.

Interest expense, net of amounts capitalized, was $129 million, compared with $127 million in the prior quarter. Capitalized interest was unchanged at $30 million. Interest income was $7 million, compared with $6 million in the prior quarter.

The Effective Tax Rate(2) was 2.2 percent, up from (73.0) percent in the prior quarter. The increase was due primarily to lower pre‑tax income largely associated with the loss on sale of the jackup fleet. The Effective Tax Rate excluding discrete items(3) was 74.0 percent, compared with 82.1 percent in the previous quarter.

Cash flows from operating activities increased $135 million sequentially to $319 million due primarily to the collection of certain receivables.

Second quarter 2017 capital expenditures of $136 million were primarily related to the company’s newbuild drillships. This compares with $122 million in the previous quarter.

“We continue to safely and efficiently convert our industry leading $10.2 billion backlog into cash,” said Jeremy Thigpen, President and Chief Executive Officer. “Across our global fleet, we have now operated for 15 consecutive months without a single lost time incident. Our revenue efficiency, which is a close proxy for rig uptime, once again exceeded 97%. And, despite a sequential decline in revenue, our Adjusted Normalized EBITDA improved to 49%.”

Thigpen added: “In addition to this excellent and consistent operating performance, during the quarter, we continued to further strengthen our balance sheet, including the private offering of $410 million in senior secured notes, the divestiture of the jackup fleet for a total consideration of $1.35 billion, and a successful cash tender offer resulting in the repurchase of approximately $1.2 billion in existing notes with maturities between 2017 and 2021.”

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 Net Income, EBITDA, Adjusted EBITDA and Adjusted Normalized EBITDA, 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.

About Transocean

Transocean is a leading international provider of offshore contract drilling services for oil and gas wells. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world.

Transocean owns or has partial ownership interests in, and operates a fleet of 44 mobile offshore drilling units consisting of 30 ultra-deepwater floaters, seven harsh environment floaters, three deepwater floaters and four midwater floaters. We also operate two high-specification jackups that were under drilling contracts when the rigs were sold, and we continue to operate these jackups until completion or novation of the drilling contracts. In addition, the company has four ultra-deepwater drillships under construction or under contract to be constructed.

For more information about Transocean, please visit: www.deepwater.com.

Conference Call Information

Transocean will conduct a teleconference starting at 9 a.m. EDT, 3 p.m. CEST, on Thursday, August 3, 2017, to discuss the results. To participate, dial +1 719-325-2440 and refer to confirmation code 6269827 approximately 10 minutes prior to the scheduled start time.

The teleconference will be simulcast in a listen-only mode over the internet and can be accessed at: www.deepwater.com, by selecting Investors, News, and Webcasts. Supplemental materials that may be referenced during the teleconference will be posted to Transocean’s website and can be found by selecting Investors, Financial Reports.

A replay of the conference call will be available after 12 p.m. EDT, 6 p.m. CEST, on August 3, 2017. The replay, which will be archived for approximately 30 days, can be accessed at +1 719-457-0820, passcode 6269827 and PIN 9876. The replay will also be available on the company’s website.

Forward-Looking Statements

The statements described in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements contain words such as "possible," "intend," "will," "if," "expect," or other similar expressions. Forward-looking statements are based on management’s current expectations and assumptions, and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, actual results could differ materially from those indicated in these forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, estimated duration of customer contracts, contract dayrate amounts, future contract commencement dates and locations, planned shipyard projects and other out-of-service time, sales of drilling units, timing of the company’s newbuild deliveries, operating hazards and delays, risks associated with international operations, actions by customers and other third parties, the future prices of oil and gas, the intention to scrap certain drilling rigs, the results of our final accounting for the periods presented in this press release and other factors, including those and other risks discussed in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2016, and in the company's other filings with the SEC, which are available free of charge on the SEC's website at: www.sec.gov. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or expressed or implied by such forward-looking statements. All subsequent written and oral forward-looking statements attributable to the company or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that occur, or which we become aware of, after the date hereof, except as otherwise may be required by law. All non-GAAP financial measure reconciliations to the most comparative GAAP measure are displayed in quantitative schedules on the company’s website at: www.deepwater.com.

This press release, or referenced documents, do not constitute an offer to sell, or a solicitation of an offer to buy, any securities, and do not constitute an offering prospectus within the meaning of article 652a or article 1156 of the Swiss Code of Obligations. Investors must rely on their own evaluation of Transocean and its securities, including the merits and risks involved. Nothing contained herein is, or shall be relied on as, a promise or representation as to the future performance of Transocean.

Notes

(1) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage. Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions. See the accompanying schedule entitled “Revenue Efficiency.”

(2) Effective Tax Rate is defined as income tax expense for continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.” 

(3) Effective Tax Rate excluding discrete items is defined as income tax expense from continuing operations, excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income from continuing operations before income tax expense excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate. See the accompanying schedule entitled “Supplemental Effective Tax Rate Analysis.”

Analyst Contacts:
Bradley Alexander
+1 713-232-7515

Diane Vento
+1 713-232-8015

Media Contact:
Pam Easton
+1 713-232-7647

              
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except share data)
(Unaudited)
              
  Three months ended   Six months ended  
  June 30,  June 30,  
  2017
 2016
 2017
 2016
 
              
Operating revenues             
Contract drilling revenues $705  $915  $1,443  $2,026  
Other revenues  46   25   93   255  
   751   940   1,536   2,281  
Costs and expenses             
Operating and maintenance  333   497   676   1,152  
Depreciation  219   225   451   442  
General and administrative  35   41   74   84  
   587   763   1,201   1,678  
Loss on impairment  (113)  (12)  (113)  (15) 
Loss on disposal of assets, net  (1,595)  (2)  (1,593)  (1) 
Operating income (loss)  (1,544)  163   (1,371)  587  
              
Other income (expense), net             
Interest income  7   4   13   10  
Interest expense, net of amounts capitalized  (129)  (98)  (256)  (187) 
Gain (loss) on retirement of debt  (48)  38   (48)  38  
Other, net  (2)  3   1   2  
   (172)  (53)  (290)  (137) 
Income (loss) from continuing operations before income tax expense  (1,716)  110   (1,661)  450  
Income tax expense (benefit)  (37)  18   (77)  116  
Income (loss) from continuing operations  (1,679)  92   (1,584)  334  
Income from discontinued operations, net of tax     1        
              
Net income (loss)  (1,679)  93   (1,584)  334  
Net income attributable to noncontrolling interest  11   11   15   17  
Net income (loss) attributable to controlling interest $(1,690) $82  $(1,599) $317  
              
Earnings (loss) per sharebasic             
Earnings (loss) from continuing operations $(4.32) $0.22  $(4.09) $0.86  
Earnings (loss) from discontinued operations             
Earnings (loss) per share $(4.32) $0.22  $(4.09) $0.86  
              
Earnings (loss) per sharediluted             
Earnings (loss) from continuing operations $(4.32) $0.22  $(4.09) $0.86  
Earnings (loss) from discontinued operations             
Earnings (loss) per share $(4.32) $0.22  $(4.09) $0.86  
              
Weighted-average shares outstanding              
Basic  391   365   391   365  
Diluted  391   365   391   365  
                  


 
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
        
  June 30,  December 31,  
  2017 2016 
        
Assets       
Cash and cash equivalents $2,471  $3,052  
Accounts receivable, net of allowance for doubtful accounts of less than $1 at June 30, 2017 and December 31, 2016  624   898  
Materials and supplies, net of allowance for obsolescence of $150 and $153 at June 30, 2017 and December 31, 2016, respectively  517   561  
Restricted cash  537   466  
Other current assets  137   121  
Total current assets  4,286   5,098  
        
Property and equipment  24,717   27,372  
Less accumulated depreciation  (5,816)  (6,279) 
Property and equipment, net  18,901   21,093  
Deferred income taxes, net  301   298  
Other assets  359   400  
Total assets $23,847  $26,889  
        
Liabilities and equity       
Accounts payable $173  $206  
Accrued income taxes  69   95  
Debt due within one year  865   724  
Other current liabilities  751   960  
Total current liabilities  1,858   1,985  
        
Long-term debt  6,525   7,740  
Deferred income taxes, net  155   178  
Other long-term liabilities  1,058   1,153  
Total long-term liabilities  7,738   9,071  
        
Commitments and contingencies       
Redeemable noncontrolling interest  42   28  
        
Shares, CHF 0.10 par value, 417,060,033 authorized, 143,783,041 conditionally authorized and 394,801,990 issued at June 30, 2017 and December 31, 2016 and 391,181,430 and 389,366,241 outstanding at June 30, 2017 and December 31, 2016, respectively  37   36  
Additional paid-in capital  11,011   10,993  
Retained earnings  3,457   5,056  
Accumulated other comprehensive loss  (300)  (283) 
Total controlling interest shareholders’ equity  14,205   15,802  
Noncontrolling interest  4   3  
Total equity  14,209   15,805  
Total liabilities and equity $23,847  $26,889  
          


 
TRANSOCEAN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
        
  Six months ended  
  June 30,  
  2017 2016 
Cash flows from operating activities       
Net income (loss) $(1,584) $334  
Adjustments to reconcile to net cash provided by operating activities:       
Depreciation  451   442  
Share-based compensation expense  21   23  
Loss on impairment  113   15  
Loss on disposal of assets, net  1,593   1  
(Gain) loss on retirement of debt  48   (38) 
Deferred income tax expense (benefit)  (39)  39  
Other, net  18   7  
Changes in deferred revenues, net  (104)  (26) 
Changes in deferred costs, net  28   52  
Changes in other operating assets and liabilities, net  (42)  (11) 
Net cash provided by operating activities  503   838  
        
Cash flows from investing activities       
Capital expenditures  (258)  (826) 
Proceeds from disposal of assets, net  329   15  
Other, net  (15)    
Net cash provided by (used in) investing activities  56   (811) 
        
Cash flows from financing activities       
Proceeds from issuance of debt, net of issue costs  403     
Repayments of debt  (1,533)  (251) 
Deposits to cash accounts restricted for financing activities  (57)  (24) 
Proceeds from cash accounts and investments restricted for financing activities  50   73  
Distributions to holders of noncontrolling interest     (16) 
Other, net  (3)  5  
Net cash used in financing activities  (1,140)  (213) 
        
Net decrease in cash and cash equivalents  (581)  (186) 
Cash and cash equivalents at beginning of period  3,052   2,339  
Cash and cash equivalents at end of period $2,471  $2,153  
          


                 
TRANSOCEAN LTD. AND SUBSIDIARIES 
FLEET OPERATING STATISTICS 
                 
                 
  Operating Revenues (in millions) 
  Three months ended   Six months ended  
  June 30,  March 31, June 30,  June 30,  June 30,  
  2017 2017 2016 2017 2016 
Contract drilling revenues                
Ultra-deepwater floaters $497 $505 $553 $1,002 $1,174 
Harsh environment floaters  104  122  100  226  281 
Deepwater floaters  36  35  51  71  136 
Midwater floaters  18  13  133  31  271 
High-specification jackups  50  63  74  113  157 
Contract intangible revenue      4    7 
Total contract drilling revenues  705  738  915  1,443  2,026 
                 
Other revenues                
Customer early termination fees  40  37  9  77  218 
Customer reimbursement revenues and other  6  10  16  16  37 
Total other revenues  46  47  25  93  255 
Total revenues $751 $785 $940 $1,536 $2,281 


                 
  Average Daily Revenue (1) 
  Three months ended   Six months ended  
  June 30,  March 31, June 30,  June 30,  June 30,  
  2017 2017 2016 2017 2016 
Ultra-deepwater floaters $482,200 $519,900 $500,300 $500,500 $494,900 
Harsh environment floaters  262,200  276,700  343,500  269,900  452,500 
Deepwater floaters  199,000  192,000  238,600  195,500  278,600 
Midwater floaters  100,300  92,300  304,600  96,700  331,200 
High-specification jackups  142,800  141,200  137,900  141,900  144,100 
Total drilling fleet $329,900 337,700 $352,500 $333,800 $374,800 


                  
   Utilization (2) 
   Three months ended   Six months ended  
   June 30,  March 31, June 30,  June 30,  June 30,  
   2017 2017 2016 2017 2016 
Ultra-deepwater floaters  38% 36% 43% 37% 46% 
Harsh environment floaters  62% 70% 46% 66% 49% 
Deepwater floaters  67% 67% 52% 67% 56% 
Midwater floaters  33% 27% 48% 30% 43% 
High-specification jackups  54% 50% 59% 52% 60% 
Total drilling fleet  44% 43% 47% 44% 49% 


                 
   Revenue Efficiency (3)
   Three months ended   Years ended
   June 30,  March 31, June 30,  June 30,  June 30, 
   2017 2017 2016 2017 2016
Ultra-deepwater floaters  97.1% 97.8% 96.6% 97.5% 95.4%
Harsh environment floaters  98.4% 97.0% 98.3% 97.6% 98.5%
Deepwater floaters  95.6% 92.6% 96.9% 94.1% 97.2%
Midwater floaters  98.8% 91.3% 98.6% 95.4% 98.1%
High-specification jackups  98.7% 104.1% 86.8% 101.6% 86.7%
Total drilling fleet  97.4% 97.8% 96.2% 97.6% 95.5%
                 
(1) Average daily revenue is defined as contract drilling revenues earned per operating day. An operating day is defined as a calendar day
during which a rig is contracted to earn a dayrate during the firm contract period after commencement of operations.
                 
(2) Rig utilization is defined as the total number of operating days divided by the total number of available rig calendar days in the
measurement period, expressed as a percentage.
                 
(3) Revenue efficiency is defined as actual contract drilling revenues for the measurement period divided by the maximum revenue calculation
for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues
the drilling unit could earn for the measurement period, excluding amounts related to incentive provisions.
                                                                                                                                                                                                                                                                       


TRANSOCEAN LTD. AND SUBSIDIARIES 
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS 
ADJUSTED NET INCOME AND ADJUSTED DILUTED EARNINGS PER SHARE 
(In millions, except per share data) 
           
           
   YTD   QTD   QTD  
   06/30/17   06/30/17   03/31/17  
Adjusted Net Income          
Net income (loss) attributable to controlling interest, as reported $(1,599) $(1,690) $91  
Add back (subtract):          
Litigation matters  (7)  1   (8) 
Restructuring charges  2   2     
Loss on impairment of assets  113   113     
(Gain) loss on disposal of assets, net  1,595   1,597   (2) 
Loss on retirement of debt  48   48     
Discrete tax items and other, net  (147)  (70)  (77) 
Net income, as adjusted $5  $1  $4  
           
Adjusted Diluted Earnings Per Share:          
Diluted earnings (loss) per share, as reported $(4.09) $(4.32) $0.23  
Add back (subtract):          
Litigation matters  (0.02)     (0.02) 
Restructuring charges          
Loss on impairment of assets  0.29   0.29     
Loss on disposal of assets, net  4.08   4.08     
Loss on retirement of debt  0.12   0.12     
Discrete tax items and other, net  (0.37)  (0.17)  (0.20) 
Diluted earnings per share, as adjusted $0.01  $  $0.01  


                       
   YTD   QTD   YTD   QTD   YTD   QTD   QTD  
   12/31/16   12/31/16   09/30/16   09/30/16   06/30/16   06/30/16   03/31/16  
Adjusted Net Income                      
Net income attributable to controlling interest, as reported $ 778  $ 243  $ 535  $ 218  $ 317  $ 82  $ 235  
Add back (subtract):                      
Litigation matters   (28)   (28)   —    —    —    —    —  
Restructuring charges   26    11    15    4    11    7    4  
Loss on impairment of assets   91    66    25    11    14    12    2  
Gain on disposal of assets, net   (13)   (5)   (8)   (3)   (5)   (4)   (1) 
Gain on retirement of debt   (148)   —    (148)   (110)   (38)   (38)   —  
(Income) loss from discontinued operations   —    —    —    —    —    (1)   1  
Discrete tax items and other, net   (50)   (26)   (24)   (32)   8    7    1  
Net income, as adjusted $ 656  $ 261  $ 395  $ 88  $ 307  $ 65  $ 242  
                       
Adjusted Diluted Earnings Per Share:                      
Diluted earnings per share, as reported $ 2.08  $ 0.64  $ 1.44  $ 0.59  $ 0.86  $ 0.22  $ 0.64  
Add back (subtract):                      
Litigation matters   (0.08)   (0.07)   —    —    —    —    —  
Restructuring charges   0.07    0.03    0.04    0.01    0.03    0.02    0.01  
Loss on impairment of assets   0.25    0.16    0.06    0.03    0.04    0.03    —  
Gain on disposal of assets, net   (0.04)   (0.01)   (0.02)   (0.01)   (0.01)   (0.01)   —  
Gain on retirement of debt   (0.40)   —    (0.40)   (0.30)   (0.11)   (0.11)   —  
(Income) loss from discontinued operations   —    —    —    —    —    —    —  
Discrete tax items and other, net   (0.12)   (0.06)   (0.06)   (0.08)   0.02    0.02    —  
Diluted earnings per share, as adjusted $ 1.76  $ 0.69  $ 1.06  $ 0.24  $ 0.83  $ 0.17  $ 0.65  
 


TRANSOCEAN LTD. AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
EARNINGS BEFORE INTEREST, TAXES AND DEPRECIATION AND RELATED MARGINS
(In millions, except percentages)
          
          
   YTD   QTD   QTD 
   06/30/17   06/30/17   03/31/17 
          
Operating  revenues $1,536  $751  $785 
Drilling contract termination fees  (77)  (40)  (37)
Adjusted Normalized Revenues $1,459  $711  $748 
          
Net income (loss) $(1,584) $(1,679) $95 
Interest expense, net of interest income  243   122   121 
Income tax expense (benefit)  (77)  (37)  (40)
Depreciation expense  451   219   232 
EBITDA  (967)  (1,375)  408 
          
Litigation matters  (6)  2   (8)
Restructuring charges  2   2    
Loss on impairment of assets  113   113    
(Gain) loss on disposal of assets, net  1,595   1,597   (2)
Loss on retirement of debt  48   48    
Adjusted EBITDA  785   387   398 
          
Drilling contract termination fees  (77)  (40)  (37)
Adjusted Normalized EBITDA $708  $347  $361 
          
EBITDA margin  (63)%  (183)%  52%
Adjusted EBITDA margin  51%  52%  51%
Adjusted Normalized EBITDA margin  49%  49%  48%


                      
   YTD   QTD   YTD   QTD   YTD   QTD   QTD 
   12/31/16   12/31/16   09/30/16   09/30/16   06/30/16   06/30/16   03/31/16 
                      
Operating  revenues $ 4,161  $ 974  $ 3,187  $ 906  $ 2,281  $ 940  $ 1,341 
Drilling contract termination fees   (396)   (169)   (227)   (9)   (218)   (9)   (209)
Adjusted Normalized Revenues $ 3,765  $ 805  $ 2,960  $ 897  $ 2,063  $ 931  $ 1,132 
                      
Net income $ 827  $ 257  $ 570  $ 236  $ 334  $ 93  $ 241 
Interest expense, net of interest income   389    108    281    104    177    94    83 
Income tax expense (benefit)   107    (15)   122    6    116    18    98 
Depreciation expense   893    226    667    225    442    225    217 
EBITDA   2,216    576    1,640    571    1,069    430    639 
                      
Restructuring charges   28    11    17    4    13    8    5 
Litigation matters   (30)   (30)   —    —    —    —    — 
Loss on impairment of assets   93    67    26    11    15    12    3 
Gain on disposal of assets, net   (13)   (5)   (8)   (3)   (5)   (4)   (1)
Gain on retirement of debt   (148)   —    (148)   (110)   (38)   (38)   — 
(Income) loss from discontinued operations, net of tax   —    —    —    —    —    (1)   1 
Adjusted EBITDA   2,146    619    1,527    473    1,054    407    647 
                      
Drilling contract termination fees   (396)   (169)   (227)   (9)   (218)   (9)   (209)
Adjusted Normalized EBITDA $ 1,750  $ 450  $ 1,300  $ 464  $ 836  $ 398  $ 438 
                      
EBITDA margin  53%  59%  51%  63%  47%  46%  48%
Adjusted EBITDA margin  52%  64%  48%  52%  46%  43%  48%
Adjusted Normalized EBITDA margin  46%  56%  44%  52%  41%  43%  39%
                             


TRANSOCEAN LTD. AND SUBSIDIARIES 
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS 
(In millions, except tax rates) 
                 
                 
  Three months ended   Year ended 
   June 30,    March 31,   June 30,    June 30,    June 30,   
   2017   2017   2016   2017   2016  
Income (loss) from continuing operations before income taxes $ (1,716) $ 55  $ 110  $ (1,661) $ 450  
Add back (subtract):                
Litigation matters   2    (8)   —    (6)   —  
Restructuring charges   2    —    8    2    13  
Loss on impairment of assets   113    —    12    113    15  
(Gain) loss on disposal of assets, net   1,597    (2)   (4)   1,595    (5) 
(Gain) loss on retirement of debt   48    —    (38)   48    (38) 
Adjusted income from continuing operations before income taxes   46    45    88    91    435  
                 
Income tax expense (benefit) from continuing operations   (37)   (40)   18    (77)   116  
Add back (subtract):                
Litigation matters   1    —    —    1    —  
Restructuring charges   —    —    1    —    2  
Loss on impairment of assets   —    —    —    —    1  
Changes in estimates (1)   70    77    (7)   147    (8) 
Adjusted income tax expense from continuing operations (2) $ 34  $ 37  $ 12  $ 71  $ 111  
                 
Effective Tax Rate (3)   2.2   (73.0)  16.9   4.7   26.1 %
                 
Effective Tax Rate, excluding discrete items (4)   74.0   82.1   14.1   78.0   25.7 %
                 
(1) Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in 
(a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities. 
                 
(2) The three and six months ended June 30, 2017 includes $(2) million of additional tax expense (benefit) reflecting the catch-up effect of an 
increase (decrease) in the annual effective tax rate from the previous quarter estimate. 
                 
(3) Our effective tax rate is calculated as income tax expense for continuing operations divided by income from continuing operations before 
income taxes. 
                 
(4) Our effective tax rate, excluding discrete items, is calculated as income tax expense for continuing operations, excluding various discrete 
items (such as changes in estimates and tax on items excluded from income before income taxes), divided by income from continuing 
operations before income tax expense, excluding gains and losses on sales and similar items pursuant to the accounting standards for 
income taxes and estimating the annual effective tax rate.