Transocean LTD (NYSE:RIG)’s earnings for the second quarter sharply declined as the company logged roughly $800 million in charges due to trimming its fleet in response to sluggish crude prices. However, the results managed to surpass consensus forecast.
The provider of offshore contract drilling services is making efforts to recover from a mistimed expansion just before the oil prices plummeted. Transocean cut its dividend to 60 cents per share, as compared to $3 per share, and aggressively slashed its number of rigs.
The Switzerland-based company now looks forward to invest $1.7 billion in capital projects, below $2.17 billion it spent one year ago.
Oil prices have dropped roughly 56 percent from last year. The prices will stay volatile due to a supply glut, China’s economic slump, and the possibility that markets maybe flooded by Iranian oil after a nuclear deal with the United States.
Oil prices plummeted again on Wednesday after the U.S. Energy Information Administration released disappointing weekly inventory data.
Transocean posted earnings of $342 million, or 93 cents per share for the quarter, well below 587 million, or $1.61 per share last year. Excluding items, earnings were $1.11 per share. Revenue for the quarter came in at $1.88 billion, representing a decline of 19 percent from the same period last year.
Analysts polled by Thomson Reuters were looking for revenue of $1.7 billion and earnings of 50 cents per share.
According to the regulatory filings, Chevron Corp. and Royal Dutch Shell PLC accounted for 20 percent and 41 percent, respectively, of Transocean (RIG)’s contract backlog as of Feb. 17. The two companies have slashed spending to cope with the sudden drop in crude prices, though oil is still trading underneath their lowered price assumptions, which is indicating further cuts.
Meanwhile, fleet utilization plummeted to 75 percent in the quarter, as compared to 78 percent last year.
