I must have been looking at different results from some of the business scribes who reviewed Transocean's (NYSE: RIG) latest quarter. That was at least the case with one headline that, I suppose for the sake of alliteration, said simply, "Transocean Trips."
By my reckoning, however, the company had a very nice trip. Earnings approached $1.11 billion, or $3.44 per share (despite a $44 million expense related to a rig's unexpected downtime) versus $973 million, or $4.63 a share for the same quarter of 2007. If you're confused about the per-share earnings decline, the number of shares outstanding was increased by reclassifications related to the company's purchase of offshore driller GlobalSantaFe last year. Revenue increased to $3.2 billion, from $1.5 billion in the September 2007 quarter. Some trip.
Of course, like many of its oilfield service peers -- along with companies in other industries -- Transocean's strong results are being contrasted with cautionary statements about what may lie ahead. That was the approach taken to one degree or another by the likes of Schlumberger (NYSE: SLB), along with Halliburton (NYSE: HAL), and Transocean's offshore drilling competitors, Diamond Offshore (NYSE: DO) and Ensco (NYSE: ESV).
Beyond that, however, Terry Bonno, Transocean's marketing VP, noted his company's strong revenues for the quarter on the post-release call. He also added that management doesn't see evidence of a pullback in the demand for deepwater rigs in the Gulf of Mexico, West Africa, or Brazil. Further, CEO Bob Long added, "I think that the overall impact on our business will not be significant if oil stays at or above $60."
Since its most recent conference call, Transocean has signed a new five-year contract with ExxonMobil (NYSE: XOM), with dayrates between $640,000 and $650,000. That range compares to average dayrates of slightly more than $400,000 for the company's ultra-deepwater floaters in the past quarter. Transocean also has inked a contract extension with BP (NYSE: BP) for operations in Angola.
Transocean's shares are currently trading at less than half their 52-week high. At the same time, the company's forward P/E is below five times, its operating margin is 46.2%, and its return on equity is 38.5%. Now, I know it's a wacky world we're inhabiting these days, but unless you assume that crude prices will continue to head south and stay there for an awfully long time, you might want to think hard about those numbers.
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