Transocean LTD (NYSE:RIG) 1Q2015 earnings exceeded analysts’ guidance by 86% as the offshore rig company named scrapped vessels, named new leadership and reduce costs to deal with a decline in drilling demand.
Excluding one-time items, Transocean reported a profit of $1.10 which exceeded the analysts’ estimate of 59-cent. The numbers carve out $881 million of costs in1Q, primarily from cutting the value of some assets. Jeremy Thigpen, who became CEO, last month, will consider the turnaround measures as the company was the worst performer in the S&P’s 500 Index last year.
He takes the control as the drilling segment need to deal with the problems of abundance of new deep-water rigs and declining demand. Several producers have reduced spending after oil prices declined from a high off over $100 to levels of $50. The experts stated that costs have been lower than expectations as most of the companies are focusing on reducing costs. It is the prime reason oil companies are reporting better than expected numbers.
There are orders of over 200 new shallow-water and floating rigs for delivery in the coming six years. It indicates that there will be a need to scrap oil vessels at a much faster pace. The problem will be faced by several offshore rig firms. Transocean intends to reduce annual dividend to 60 cents per share from the existing annual payout of $3. The decision was taken after calls from investor Carl Icahn.
The sales dropped 13% to $2.04 billion while costs declined 11% from the first three quarter of 2014. The net loss came at $1.33 a share compared to profit of $1.25 in 1Q2014 and marked third successive quarter of negative results for the company. It compares with a profit of $456 million, or $1.25, a year earlier. Transocean LTD (NYSE:RIG) share will react to the numbers on Thursday’s trading session as the earnings statement was issued after the close of market hours.