$9 million from the gain on the sale of the Transocean Mercury,
$8 million of net charges related to litigation matters not associated with the Macondo well incident, and
- $38 million of net charges primarily related to discrete tax items.
First quarter 2011 results also included expenses associated with the Macondo well incident of $23 million, $19 million after tax, or $0.06 per diluted share. These expenses were primarily related to increased insurance premiums and legal costs.
Operations Quarterly Review
Revenues for the three months ended March 31, 2011 were $2.144 billion, compared to revenues of $2.127 billion during the three months ended December 31, 2010. First quarter contract drilling revenues were impacted by lower utilization and revenue efficiency. Our Deepwater and Midwater Floater fleets experienced lower utilization due to the stacking of rigs, as well as increased shipyard time related to contract preparation, special periodic surveys and major maintenance projects. Compliance with new well control equipment certification requirements, higher standards for equipment condition and capacity constraints on our vendors contributed to reduced revenue efficiency among our Ultra-Deepwater and Deepwater Floaters. Partially offsetting lower contract drilling revenue was additional revenue from two newbuild rigs commencing operations. Other revenues increased primarily from additional drilling management services activity.
Operating and maintenance expenses totaled $1.359 billion for the first quarter 2011, up slightly from $1.339 billion for the prior quarter. The change was due to increased drilling management services activity, which was partially offset by reduced rig-related maintenance costs.
Depreciation and amortization expense was $354 million in the first quarter 2011 compared to $381 million in the prior quarter. The $27 million decrease was primarily due to the reduced carrying amounts of our Standard Jackups resulting from the approximately $1 billion asset impairment recognized on that asset group during the fourth quarter 2010.
Liquidity and Interest Expense
Interest expense, net of amounts capitalized for the first quarter 2011, was $145 million, compared to $152 million in the fourth quarter 2010.
Cash flow from operating activities decreased to $390 million for the first quarter 2011 compared to $796 million for the fourth quarter 2010. The decline in cash flow from operations resulted primarily from an increase in working capital.
Effective Tax Rate
Transocean's Annual Effective Tax Rate(1) for the first quarter 2011, which excludes various discrete items, was 19.3 percent. The Effective Tax Rate(2) for the first quarter was 33.1 percent, primarily reflecting the impact of discrete items resulting from changes in estimates.
Conference Call Information
Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on May 5, 2011. To participate, dial +1 719-325-2234 and refer to confirmation code 8570996 approximately five to 10 minutes prior to the scheduled start time of the call.
In addition, the conference call will be simultaneously broadcast over the Internet in a listen-only mode and can be accessed by logging onto Transocean's website at www.deepwater.com and selecting "Investor Relations." A file containing four charts to be discussed during the conference call, titled "1Q11 Charts," has been posted to Transocean's website and can also be found by selecting "Investor Relations/Quarterly Toolkit." The conference call may also be accessed via the Internet at www.CompanyBoardroom.com by typing in Transocean's New York Stock Exchange trading symbol, "RIG."
A telephonic replay of the conference call should be available after 1:00 p.m. EDT, 7:00 p.m. CEST, on May 5, 2011, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 8570996. Also, a replay will be available through the Internet and can be accessed by visiting either of the above-referenced internet addresses. Both replay options will be available for approximately 30 days.
SOURCE: Transocean Ltd.