Thursday, July 27, 2000


Transocean Sedco Forex beats Wall Street's
expectations
Beating Wall Street analysts' expectations, Transocean Sedco Forex Inc. today announced that net income for the three months ended June 30, 2000 was $35.9 million, or $0.17 per diluted share, on revenues of $299.2 million.

For the six months ended June 30, 2000, net income totaled $68.4 million or $0.32 per diluted share, on revenues of $600.1 million. The results include a cash settlement of $25.1 million, or $0.08 per diluted share, relating to the early termination of a rig contract. During the same six months in 1999, net income was $38.7 million, or $0.35 per diluted share, on revenues of $351.6 million. Operating and maintenance expense for the first six months of 1999 included charges for severance costs and provisions for potential legal claims totaling $42.0 million, or a net $0.30 per diluted share.

Results for the three and six months ended June 30 can't be meaningfully compared with last year, because of the merger of Transocean Offshore and Sedco Forex. That created the world's largest offshore drilling contractor, with an equity market capitalization in excess of $10.0 billion and a mobile offshore drilling fleet of 72 rigs, including six newbuilds that are not yet active.

Average utilization of the fleet rose to 75% for the three months ended June 30, 2000. This compares with a first quarter utlization rate of 62-63%.

President and CEO J. Michael Talbert said the Improvement in fleet utilization was strongest in Asia, the United Kingdom, Africa, and North America. "Within these regions, nine rigs, which were idle for all or a significant portion of the first three months of the year, returned to work during the quarter," he said.

"At present," Talbert continued, "the company is experiencing full utilization of its actively marketed fleet in four out of seven regions worldwide. However, average fleet dayrates continued to decline during the quarter as previously idle rigs returned to active status at competitive spot market rates. During the three months ended June 30, 2000, the average dayrate for our mobile offshore drilling fleet declined to $69,100 from $75,400 in the first three months of the year and from a pro forma combined $88,500 during the three months ended June 30, 1999."

Talbert added that a strong case for a gradually improving business environment can now be made, stating that, "An improving business outlook is supported by commodity prices, growing world crude oil consumption, declining excess productive capacity in OPEC, and numerous deepwater development opportunities in the U.S. Gulf of Mexico, Brazil and West Africa. Upstream spending levels of the large, global exploration and production companies are now beginning to respond to the strengthening industry fundamentals, as evidenced by a rising international rig count and a growing number of customer inquiries regarding rig availability during the second half of 2000 and into 2001. If this strengthening business environment persists, we should experience improvement in average utilization and dayrates within our global offshore drilling fleet."

The company also provided an update on six newbuild rig projects in progress, consisting of two Discoverer Enterprise-class, ultra-deepwater drillships, three Sedco Express-class, ultra-deepwater semisubmersibles and one Trident jackup. Estimated delivery of the Discoverer Spirit and Discoverer Deep Seas is expected by the late third quarter and the late fourth quarter of 2000, respectively, unchanged from the previous update. Anticipated delivery dates of the Sedco Express, Cajun Express and Sedco Energy have been extended to the fourth quarter of 2000 from the third quarter of 2000, due primarily to delays in the testing and commissioning phase of each rig. The expected fourth quarter 2000 delivery date of the Trident 20 remains unchanged.

Finally, the company reported the sale of a second-generation semisubmersible, the Transocean Discoverer, during July 2000. Net proceeds from the sale of the rig, which had been idle in the U.K. sector of the North Sea since February 2000, totaled approximately $43 million and will result in an estimated gain of $9 million, or $0.04 per diluted share, in the third quarter of 2000.

 

EC takes Spain to European Court over shipyard aid
The European Commission has referred a case involving Spanish shipyard aid to the European Court of Justice. It follows Spain's failure to comply with a Commission decision ordering the recovery of illegal state aid. The aid in question took the form of special tax credits amounting to PTA 18.451 billion (about $100 million) paid in 1998 to the publicly-owned merchant shipyards owned by state-owned holding company Sociedad Estatal de Participaciones Industriales (SEPI).

In August 1997 the Commission approved a controversial aid deal that was supposed to support the restructuring of the publicly-owned Spanish yards. That deal set a maximum of special tax credits of 58 billion pesetas for the period 1995 to 1999, with the yards not being allowed to also receive tax credits under measures aimed at industry in general.

In October 1999, following an investigation procedure under EC Treaty terms, the Commission concluded that special tax credits of PTA 18.451 billion paid in 1998 were not compatible with the previous decision and should be repaid with interest.

The Commission has decided to act in the light of Spain's failure to execute a Commission decision of October last year ordering the recovery of the illegal aid plus interest . Despite reminders, Spain has not complied with the decision, which it was supposed to execute within two months.

Spain earlier this year asked to the European Court. to annul the Commission's decision. However, the Commission maintains that this action in the court does not have the effect of suspending its decision.

The move comes soon after news that the Commission is to investigate SEPI's "purchase" from Astilleros Españoles SA (i.e. from itself) of two yards and a diesel works prior to merging the ailing AESA into military shipbuilder Bazan

 

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