Transocean Q2 Results

Transocean Inc. Reports Second Quarter 2008 Financial Results.

HOUSTON--(BUSINESS WIRE)--Aug. 6, 2008--Transocean Inc. (NYSE:RIG) today reported net income for the three months ended June 30, 2008 of $1.107 billion, or $3.45 per diluted share, compared to net income of $549 million, or $2.63 per diluted share for the three months ended June 30, 2007. Revenues for the second quarter of 2008 were $3.102 billion compared to $1.434 billion for the second quarter of 2007.

For the six months ended June 30, 2008, net income totaled $2.296 billion, or $7.15 per diluted share, on revenues of $6.212 billion. For the same period last year, net income totaled $1.102 billion, or $5.24 per diluted share, on revenues of $2.762 billion.

Transcript.

And, our next question comes from Lee Cooperman with Omega Advisors. Please go ahead.

Lee Cooperman

Thank you. Just, I apologize if I ask a question that was redundant, but I had to leave the call for a few minutes. I have two questions. Your contract back, I’m sorry, okay, You contract backlog is now $40.7 billion and our estimate that the cash margin is about $24.4 billion. If we back out the $4 billion in remaining newbuild CapEx, that leaves about $20.4 billion, which now I guess compares to debt of around $15.3 billion. So, this issue of returning money to shareholders I assume is going to be an issue that will be discussed sometime this year. Is that a reasonable view?

Bob Long

I think it’s reasonable to say that it will be discussed this year. We are already thinking hard about what we are going to do there, Lee. On your numbers, I think you are a little bit high with your net and I suspect what you have left out is cash taxes and some allocated local costs.

Lee Cooperman

Got, you. Okay. But in principle this is a possible this year type of discussion?

Bob Long

It’s definitely a this year type of discussion. I won’t promise you that we will make a decision to do anything this year, but.

Lee Cooperman

My only promise I want from you is that we don’t buy back overvalued stock. If we go the route of stock repurchase, we want to make sure that it’s undervalued.

Bob Long

Understood.

Lee Cooperman

Okay. Now, the second question, when we first met three or four years ago we talked about the issues that would determine the outlook for the Company, and some of the issues. We talked about the importance of the commodity price and you had said back then that deepwater drilling was economic down to prices as low as $35 a barrel.

Second, you said important for prospectivity, in other words that if we don’t find stuff the customer is not going to come back and keep drilling. Third was the risk of over builds. I’m just wondering how you would see these three issues today in other deepwater is economic down to prices as low as X given the inflation in oil country goods, second how is prospectivity lined up, in my own advantage point it looks like the only place that’s undiscovered -- deposits exist is deepwater offshore, which is terrific for us. Third, this financial environment we are in would seem to suggest that overbuilding, if it’s a risk, would be a risk that is being pushed out somewhat because of the constrained credit environment. But I would love your inputs on these three items as you gave several years ago.

Bob Long

Okay, I will take a stab at it. But on the price of oil that will justify deepwater, it’s difficult to say based on some input from a few operators that we hear consistently. My guess would be -- and it’s obviously a total guess -- is that $35 a barrel range is probably up now to the $60 or $65 a barrel range, maybe higher in certain areas. But I’m guessing its somewhat in that range. On the prospectivity its seems to me and this maybe the result of the escalation of the old prices that prospectivity has not been problem that potentially it could have been, in part they also be due to technology, but clearly the success rate that the operators are having, particularly in deepwater, has been significant. There is a big backlog of development and appraisal opportunities out there. There is also a growing need for additional deepwater exploratory efforts. I think many of the operators have been concerned about the inability to get drilling capacity to dedicate to an exploration program. So I don’t think that prospectivity is going to be an issue in any kind of a near-term future. On overbuilding, I think that we have seen such an increase in demand that despite the fact that we have had a lot of new construction in the floater business, 70% or more of that is already contracted. I am very confident that the rest of the speculative newbuilds, given the demand we see out there, is going to get contracted. And given the shipyard delivery times now, I think the last deepwater rig that was ordered has a 2012 delivery. You are not going to see much additional capacity come into this business for the next four years. So I think your characterization that some of these risks have been pushed out is accurate.

Lee Cooperman

Thank you very much. Let me just take a moment to thank you and your whole team for doing such a wonderful job for the shareholders.