RIG $157.40 Transocean 1st-qtr profit up sharply, tops Street
Wed May 7, 2008 12:55pm EDT
(Recasts first paragraph, adds details from conference call, analyst comment, updates share price)
By Anna Driver
HOUSTON, May 7 (Reuters) - Transocean Inc (RIG.N: Quote, Profile, Research), the world's largest oil and gas drilling contractor, said on Wednesday quarterly profit more than doubled on higher rates for its deepwater rigs and lower-than-expected expenses.
The company's results exceeded Wall Street expectations, but gains in its share price were held in check by weakness in the energy stocks and by expectations for increased costs in the second quarter, analysts said.
Record-high crude oil prices have created a boom in demand for floating rigs and drill ships that operate in the deepest waters. Drilling contractors have benefited as tight supplies have pushed daily rig rates above $600,000 in some cases.
"The deepwater market continues to be very good with near-term demand clearly in excess of supply, and new highs being established for dayrates and long-term contracts," Robert Long, Transocean's CEO, told analysts on a conference call.
First-quarter profit jumped to $1.19 billion, or $3.71 per share, from $553 million, or $2.62 per share, a year earlier.
Excluding one-time items, the company earned $3.80 a share. Analysts, on average, had expected $3.32, according to Reuters Estimates.
"The beat was mainly due to lower operating expenses," said Mark Urness, oilfield service analyst at Calyon Securities. "It's probably deferred maintenance, so it will come back later in the year. Still, it's still a good quarter."
Costs for the first quarter of 2008 benefited from the postponement of several shipyard and major maintenance projects to later in the year, according to the company.
"So net-net, it's not such a big beat," said John Derrick, co-manager of U.S. Global Investors' Global MegaTrends Fund.
On a conference call, Transocean said its operating and maintenance costs would be significantly higher in the second quarter, although overall costs for the year would stay within expectations.
Revenue soared 135 percent to $3.11 billion, boosted by Transocean's acquisition of smaller rival GlobalSanteFe Corp in November 2007.
Average daily rental rates, or dayrates for the Houston company's total fleet rose 15.6 percent to $229,000.
The increase in average dayrate was seen in all categories, primarily due to rigs starting new contracts at the higher dayrates, Transocean said.
Transocean shares edged up 84 cents to $158.69 in afternoon trading on the New York Stock Exchange. The stock outperformed the Philadelphia Stock Exchange index of oilfield service companies , which fell 0.5 percent. (Editing by Brian Moss)
