Both Transocean Ltd. (NYSE: RIG) and Seadrill Ltd. (NYSE: SDRL) reported their fourth-quarter financial results this week. Transocean’s results came after the markets closed Wednesday, and Seadrill reported before the markets opened Thursday. Both companies are involved with deepwater drilling and the transportation of oil. Another thing they have in common is that they both cut their dividends going forward.

Transocean reported its financials as $0.95 in earnings per share (EPS) and $2.24 billion in revenue, which compare to Thomson Reuters consensus estimates of $0.77 in EPS and $2.10 billion in revenue. In the same quarter of the previous year, it had EPS of $0.73 and $2.33 billion in revenue.

Revenues decreased sequentially by $33 million. The decrease was due primarily to increased idle time on several rigs, partly offset by higher revenue efficiency, lower out-of-service days and the commencement of operations in the third quarter of the company’s two newbuild ultra-deepwater drillships, Deepwater Asgard and Deepwater Invictus.

The company gave guidance for the 2015 full year as:

• Fleet average revenue efficiency of 95%
• Other revenues, primarily including recharges and other miscellaneous revenues, $115 million to $130 million
• Operating maintenance expenses of $4.5 billion to $4.7 billion
• Capital expenditures of $1.8 billion

The consensus estimates for the 2015 full year are $2.05 in EPS and revenue of $7.58 billion.

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In the fourth quarter, cash flows from operating activities decreased $316 million from third quarter 2014 to $566 million, due primarily to changes in working capital. In this period, capital expenditures decreased $47 million sequentially to $318 million.

Fleet revenue efficiency was 95.3%, up from 92.6% in the third quarter. Revenue efficiency on ultra-deepwater rigs was 95.4%, up from 91.6% in the prior quarter. Contract backlog was $21.2 billion as of mid-February, 2015.

In the middle of February, a few key analysts made calls on Transocean:

• BMO Capital Markets initiated coverage with an Underperform rating and a price target of $16.
• Deutsche Bank maintained an Underperform rating and lowered its price target to $6 from $16.
• Credit Suisse downgraded Transocean to Underperform from Neutral and lowered its price target to $12.

On Wednesday, shares of Transocean closed up about 0.9% at $16.04. The stock has a consensus analyst price target of $17.20 and a 52-week trading range of $14.50 to $46.12.

Seadrill reported its financials as $0.79 in EPS and $1.26 billion in revenue. That compared to Thomson Reuters consensus estimates of $0.63 in EPS on revenue of $1.25 billion. In the fourth quarter of 2013, it posted $0.47 in EPS and $1.47 billion in revenue.

A few operational highlights for Seadrill were:

• A 94% economic utilization for its floater fleet and 98% for its jack-up fleet for the fourth quarter 2014
• An order backlog of approximately $17.2 billion
• At the end of December 2014, cash and cash equivalents of $831 million, an increase of $193 million from the previous quarter
• Net cash provided by operating activities for the 12-month period ended in December 2014 of $1.57 million

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Per Wullf, CEO and president of Seadrill, offered a somewhat positive outlook:

Together with the rest of the industry, we are facing challenging times. Seadrill operates in a market that is, and will continue to be cyclical. […]

We are optimistic that the drilling industry will benefit from the rebalancing that is occurring as older rigs are retired, and believe that this will ultimately result in a more healthy industry in the long run. We have built Seadrill’s business with an eye towards generating returns through the cycle and we believe that we are well positioned to take advantage of this downturn and come out stronger.

Following the release of the earnings report, shares of Seadrill were up 1.4% at $11.92. The consensus price target is $16.65, and the 52-week trading range is $14.50 to $46.12.

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