Transocean Misses the Mark (RIG, DO, SLB)

Transocean Ltd. (NYSE:RIG) followed in the footsteps of competitors Diamond Offshore Drilling Inc. (NYSE: DO) and Schlumberger Ltd. (NYSE: SLB), reporting fourth quarter and full-year results that missed expectations. Transocean announced net income for the quarter of $800 million (EPS of $2.50) on revenue of $3.27 billion. Analysts had expected EPS of $3.70 on revenue of $3.29 billion.

For the year, Transocean reported net income of $4.20 billion (EPS of $13.09) on revenue of $12.67 billion, while analysts expected EPS of $14.34 on revenue of $12.62 billion. Average day rates at the end of the year had increased from $242,000 at the end of the third quarter to $251,500.

To counter the bad news, Transocean yesterday announced that it would seek shareholder approval to repurchase up to $3.02 billion worth of outstanding shares. That seems like a waste of money, especially given the $400 million in charges that the company took in the fourth quarter.

Transocean did not provide any guidance or backlog information, so it’s hard to figure out where the company’s going in the next 12 months. Investors appear to believe it’s going south, as pre-open trading has moved the share price down by about 3%.

Paul Ausick
February 17, 2009