Transocean Ltd. (NYSE: RIG) (SIX: RIGN) reported net income attributable to controlling interest of $677 million, or $2.09 per diluted share, on revenues of $2.602 billion for the three months ended March 31, 2010. The results compare to net income attributable to controlling interest of $942 million, or $2.93 per diluted share, on revenues of $3.118 billion for the three months ended March 31, 2009.
First quarter 2010 results were adversely impacted by certain net charges, after tax, totaling $42 million, or $0.13 per diluted share, as follows:
-- $15 million loss on the sale of GSF Arctic II and GSF Arctic IV,
-- $16 million primarily regarding impairment charges related to accelerated depletion of certain oil and gas properties, and,
-- $11 million of net charges primarily related to discrete tax items
First quarter 2009 results were adversely impacted by certain net charges, after tax, totaling $264 million, or $0.82 per diluted share, consisting of $221 million of impairments on rigs held for sale and $43 million of discrete tax items, merger-related costs and losses on the retirement of debt.
Operations Quarterly Review
Revenues for the three months ended March 31, 2010 decreased to $2.602 billion compared to $2.733 billion during the three months ended December 31, 2009. The $131 million decrease was primarily due to a $78 million reduction in contract drilling revenue resulting from the stacking of rigs in the previous quarter, a $78 million reduction in revenue from increased rig time in shipyard and mobilizations partially offset by a $49 million increase in revenue from newly constructed ultra-deepwater rigs commencing or continuing operations in the quarter.
Operating and maintenance expenses totaled $1.196 billion for the first quarter 2010, down approximately eight percent compared to $1.296 billion for the prior quarter. The $100 million quarter-to-quarter reduction in operating and maintenance costs occurred as a result of a $123 million reduction primarily in maintenance costs and a $21 million reduction in costs related to stacked rigs. These items were partially offset by a favorable impact in the prior quarter from litigation settlements and $17 million of costs in the first quarter related to the after-sale chartering of the GSF Arctic IV and $15 million of additional operating costs related to newly constructed ultra-deepwater rigs.
Depreciation, depletion and amortization expense was $401 million in the first quarter 2010, up five percent compared to $382 million for the fourth quarter 2009. The $19 million increase was primarily due to impairments related to our oil and gas properties and the commencement of operations of newly constructed ultra-deepwater rigs.
General and administrative expenses were $63 million for the first quarter 2010, compared to $46 million in the prior quarter. The $17 million increase was primarily related to an accelerated vesting of share-based compensation awards.
Liquidity and Interest Expense
Interest expense, net of amounts capitalized for the first quarter 2010 totaled $132 million, compared to $119 million in the prior quarter. The increase was primarily due to reduced capitalized interest related to the commencement of operations of newly constructed ultra-deepwater drillships in the fourth and first quarters. As of March 31, 2010, total debt was $11.439 billion, compared to $11.717 billion as of December 31, 2009, a decrease of $278 million reflecting $213 million repayment of joint venture debt, lower outstanding commercial paper program borrowings and the early retirement of the GSF Explorer capital lease.
Cash flow from operating activities totaled $1.172 billion for the first quarter 2010, in line with $1.175 billion generated in the fourth quarter 2009.
Effective Tax Rate
Transocean's reported Effective Tax Rate(1), which includes various discrete items primarily resulting from the impact of oil and gas impairments and changes in prior years tax estimates, for the first quarter 2010 was 15.8 percent. Excluding these discrete items the Annual Effective Tax Rate(2) for the first quarter was 15.0 percent.