RIG 1Q08 Earnings Recap

Transocean's 1Q08 Earnings Report Stats:

Beat ? --> YES (reported $3.71/share vs estimates of $3.32/share)

Profits --> Up 115% to $1.19 Billion (from $553 million)
Sales --> Up 134% to $3.11 Billion (from $1.33 Billion)

Avg Rent for All Oil RIGS: up 15.6% to $229,000/day
Avg Rent for DEEPWATER Oil RIGs: Up 26% to $380,000/day

Avg Price of Oil per barrel in 1Q08: $97.82 (today the price of oil is $125.96 or nearly 30% higher!)

Order Backlog: Up 11% to $34.2 Billion (!)
Operating + Maintenance Costs: Up 25% to $1.16 Billion (1/3 of which due to the GSF merger)
Effective Tax Rate: 15.5%...RIG expects this rate to stay within 13-14% for 2008

Other Highlights + Guidance:
*1Q08 marks the first full quarter in which company results included the sales + profits associated with RIG's $20.7 Billion November 2007 GlobalSantaFe merger

*Contract drilling revenue for 1Q08 improved to $2.64 billion sequentially from $1.86 billion in 4Q07. $663 million of the increase was due to a full quarter of revenues from GlobalSantaFe operations.

*Operating Costs for 1Q08 benefitted from a temporary postponement of several shipyard and maintence projects (namely: Galaxy II, The Expedition, Sedco 711 and the Amirante) to later in the year...thus RIG believes its 2nd qtr costs will be significantly higher vs 1Q08...however overall costs for full year 2008 are expected to still stay in line with expectations of $5.15-$5.3 Billion (looks like just a qtryl shift/rollover of expenses)

*According to the CEO, Bob Long: "The DEEPWATER market continues to be very good with near-term demand clearly in excess of supply, and new highs being established for day rates and long-term contracts...The MIDWATER floater market continues to be excellent also. We've had a number of signings in the first quarter at very nice rates, with the market staying in the high $300,000 to high $400,000 range depending on the rig's capability and on the locations of the rigs. Lastly, the JACKUP (shallow water or 'land drilling') market remains very strong. Demand continues to increase in many different areas of the world, effectively absorbing the new supply that has been entering the market. We still feel comfortable that the market is going to remain solid for the remainder of the year, but with something like 60 new rigs coming out of the shipyard between now and the end of 2009 it is difficult to say where the market will go beyond that."

*According to Terry Bono, SVP of Marketing + Planning: "The (DEEPWATER DRILLING) fixtures I've just highlighted continue to support the view of an extended up-cycle for the high-specification units, with continued upward movement of day rates for these class of rigs, as we foresee a supply shortage in this segment through at least 2010. We also continue to see substantial incremental demand for appraisal and subsequent development in traditional deepwater provinces like Brazil, Gulf of Mexico and West Africa. We are experiencing growing demand in the emerging deepwater areas, as evidenced by the placement of our three new builds and the recent outstanding tender for additional deepwater capacity in India. Brazil continues to create excitement around the anticipated incremental demand generated by the prolific light oil and non-associated gas discoveries in the Santos Basin in Tupi, Jupiter, and now Carioca."

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*Anecdotally and as I expected per my earlier post on Brazil's recent oil discoveries ('Brazil's New Oil in Too Deep?'), RIG sees significant longer term growth opportunities related to the DEEPWATER drilling of these fields!

Full Disclosure: I own shares of RIG.