Swiss-based Transocean Ltd. (RIG) announced this morning a share buyback program worth about $3.2 billion. The company will also pay a special dividend in the form of a capital reduction to the company’s par value worth another $1 billion. The capital reduction amounts to about $3.11 per share and is not subject to Swiss withholding taxes.
Transocean is the largest of the world’s offshore drilling contractors. It will report quarterly and annual earnings on Feb. 24, but today’s announcement answers competitors Noble Energy (NE) and Diamond Offshore (DO
), both of which have already announced shareholder bonuses.
Diamond Offshore (DO) declared a special dividend of $1.875 per share in addition to its quarterly dividend of $0.125 per share, payable on March 1. Noble Energy (NE), another Swiss-based company, expects to pay a capital reduction of 0.52 Swiss francs per share in four equal quarterly installments beginning in August 2010. Noble will also return 0.56 Swiss francs in a single payment in August. At today’s exchange rate, one U.S. dollar is equal to about 1.08 Swiss francs.
While all three drillers are growing again, none is doing so well that it is putting the others in the shade. Noble’s latest quarterly report for the company’s third fiscal quarter ended in December shows an average rig utilization rate of 81%, lower than a year ago, but 1% better sequentially, and an average day rate of about $132,000, down from nearly $152,000 a year ago, and $143,000 sequentially. The company reported that it had extended contracts with Pemex on two rigs for a day rate of $127,000.
Diamond Offshore reported lower revenues and earnings in the fourth quarter 2009. Utilization rates on its floaters have declined from 89% in the fourth quarter of 2008 to 81%. Intermediate semi-submersible utilization is flat with a year ago, but jack-up rig utilization rates have fallen from 92% to 63% in one year. Day rates have dropped for semi-submersibles and jack-ups and risen slightly for floaters.
In the quarter ended September 2009, Transocean reported total rig utilization rates of 75%, down from 84% in the prior quarter and down from 89% from the same period in 2008. Day rates, however, have improved across Transocean’s total fleet, from about $266,000 per day in the second quarter and $242,000 a year ago, to nearly $284,000 per day in the September quarter.
Analysts’ average fourth-quarter 2009 estimates for Transocean earnings are EPS of $2.56, compared with $3.70 for the same period in 2008. Forecasts for the current quarter are average EPS of $2.49. Annual 2009 EPS is expected to be $11.70, dropping to $10.44 for 2010.
Traditionally, drilling stocks have followed oil prices, and there’s no reason to think that will change in 2010. The strength of the U.S. dollar and the strength of the global economic recovery will drive oil prices. Drillers will continue to follow oil prices and throw off cash while they can. Longer-term appreciation in the drillers’ shares is at best problematic, but for now, they’re a good deal for shareholders.
