Transocean Ltd.

08/01/2012 | Press release

Transocean Ltd. Reports Second Quarter 2012 Results

distributed by noodls on 08/02/2012 01:19

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Aug 01, 2012 (Marketwire via COMTEX)

ZUG, SWITZERLAND--(August 1, 2012) - Transocean Ltd. (NYSE: RIG) (SIX: RIGN)

Second quarter 2012 revenues were $2.575 billion compared with $2.337 billion in the first quarter 2012;
Excluding an additional $750 million for estimated loss contingencies associated with the Macondo well incident, second quarter 2012 operating and maintenance expenses were $1.607 billion compared with $1.463 billion in the first quarter 2012;
Second quarter 2012 net loss attributable to controlling interest was $304 million, which included $560 million of net unfavorable items. This compares with the first quarter 2012 net income attributable to controlling interest of $10 million, which included $181 million of net unfavorable items;
Revenue efficiency(1) was 92.5 percent in the second quarter, compared with 90.6 percent in the first quarter 2012;
Fleet utilization(2) was 66 percent in the second quarter, compared with 61 percent in the first quarter 2012;
Cash flows from operating activities were $459 million in the second quarter, which compares with $540 million in the first quarter 2012;
Second quarter 2012 Annual Effective Tax Rate(3) was 31.1 percent compared with 27.6 percent in the first quarter 2012;
New contracts totaling $4.7 billion were secured in the Fleet Status Report periods April 18, 2012 through July 18, 2012. Backlog at July 18th was $22.9 billion, a net increase of $2.3 billion. Since July 18, 2012, additional contracts totaling $144 million were secured; and
Prior period consolidated financial statements have been adjusted to correct for an error primarily related to the recognition of assets for insurance recoveries for legal and other costs associated with the Macondo well incident. These corrections, described in Appendix A to this release, are immaterial to the prior period consolidated financial statements.

Transocean Ltd. (NYSE: RIG) (SIX: RIGN) today reported a net loss attributable to controlling interest of $304 million, or $0.86 per diluted share, for the three months ended June 30, 2012. Second quarter 2012 results included net unfavorable items of $560 million, or $1.58 per diluted share. The results compare with net income attributable to controlling interest of $124 million, or $0.39 per diluted share, for the three months ended June 30, 2011. Second quarter 2011 results included net unfavorable items of $36 million, or $0.11 per diluted share, primarily associated with impairment losses on three standard jackups and charges related to unfavorable discrete tax items.

Net unfavorable items, after tax, impacting the second quarter of 2012 included the following:

$750 million, or $2.12 per diluted share, for estimated loss contingencies associated with the Macondo well incident that the company believes is probable and for which a reasonable estimate can be made at this time. This estimate will be adjusted to reflect new information and future developments as they become known;
$145 million, or $0.41 per diluted share, associated with discrete tax benefits;
$64 million, or $0.18 per diluted share, net gain on the sale of Transocean Nordic, Transocean Shelf Explorer, Roger W. Mowell, and GSF Adriatic II;
$14 million, or $0.04 per diluted share, loss associated with Quantum's exchange of its 50 percent interest in Transocean Pacific Drilling Inc. for Transocean Ltd.'s shares;
$12 million, or $0.03 per diluted share, in impairments of long-lived assets classified as held for sale; and
$7 million, or $0.02 per diluted share, primarily associated with a gain on disposal of the discontinued operations of Challenger Minerals Inc.

Operations Quarterly Review

Revenues for the three months ended June 30, 2012 were $2.575 billion, compared with revenues of $2.337 billion during the three months ended March 31, 2012. Contract drilling revenues increased $170 million mainly due to fewer shipyard days and higher revenue efficiency(1) primarily on High Specification Floaters. Total fleet revenue efficiency(1) was 92.5 percent for the second quarter, compared with 90.6 percent in the first quarter 2012. Other revenues increased $68 million to $185 million for the second quarter 2012, compared with $117 million in the prior quarter, primarily due to increased activity levels in the company's drilling management services reporting unit outside the U.S. GOM.

Excluding $750 million for estimated loss contingencies associated with the Macondo well incident, operating and maintenance expenses totaled $1.607 billion for the second quarter 2012. This compares with $1.463 billion in the first quarter 2012. The increase in operating and maintenance expenses was partly due to approximately $82 million in higher costs incurred on rigs undergoing shipyard, maintenance, survey and repair projects. In addition, drilling management services activity levels outside the U.S. GOM increased operating and maintenance costs by $62 million.

General and administrative expenses were $79 million for the second quarter 2012 compared with $69 million in the previous quarter. The increase was primarily due to transaction costs associated with the Quantum exchange.

Correction of Prior Period Consolidated Financial Statements

Please note that previously reported consolidated financial statements have been adjusted to reflect prior period corrections primarily related to the recognition of assets for insurance recoveries for legal and other costs associated with the Macondo well incident. These corrections are immaterial to the prior year consolidated financial statements.

For the three months ended March 31, 2012, the corrections reduced income from continuing operations by $55 million and net income attributable to controlling interest by $32 million. For the three months ended June 30, 2011, the corrections reduced income from continuing operations by $31 million, and net income attributable to controlling interest by $31 million. Additional details of these corrections, as well as required reconciliations, are provided in Appendix A.

Income Taxes

Transocean's second quarter Effective Tax Rate(4) was 8.6 percent compared with 47.2 percent in the first quarter 2012. The decrease in the Effective Tax Rate(4) was due to favorable changes in estimates mainly for settlement of prior year's tax liabilities. Transocean's Annual Effective Tax Rate(3) for the second quarter 2012, which excludes various favorable discrete items totaling $145 million, was 31.1 percent. This compares with 27.6 percent for the prior quarter. The increase was primarily due to changes in the blend of income that is taxed based on gross revenues versus pre-tax income and rig movements between taxing jurisdictions, among other things. Second quarter 2012 income tax expense included an adjustment of $5 million, or $0.01 per diluted share, required to reflect an increase in the Annual Effective Tax Rate(3) to 29.6 percent for the six months ended June 30, 2012, from 27.6 percent for the first quarter of 2012.

Other Items

For the second quarter, interest expense, net of amounts capitalized, was $183 million, compared with $180 million in the first quarter 2012. Capitalized interest for the second quarter 2012 was $12 million compared with $13 million in the prior quarter. Interest income decreased to $13 million in the second quarter, compared with $15 million in the first quarter 2012.

Cash flows from operating activities were $459 million for the second quarter compared with $540 million for the first quarter 2012. Capital expenditures decreased to $236 million for the second quarter compared with $260 million in the first quarter of 2012. The lower capital expenditures were primarily due to timing of shipyard milestone payments associated with the company's newbuild program.

Forward-Looking Statements

Statements included in this news release, including those regarding estimates of Transocean's goodwill or long-lived asset impairments and the estimated loss contingencies associated with the Macondo well incident, are forward-looking statements that involve certain assumptions. These statements are based on currently available competitive, financial, and economic data along with our current operating plans and involve risks and uncertainties including, but not limited to, market conditions, Transocean's results of operations, the effect and results of litigation, assessments and contingencies, and other factors detailed in "Risk Factors" and elsewhere in Transocean's filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize (or the other consequences of such a development worsen), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those forecasted or expected. Transocean disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

Conference Call Information

Transocean will conduct a teleconference call at 10:00 a.m. EDT, 4:00 p.m. CEST, on Thursday, August 2, 2012. To participate, dial +1 719-325-4929 and refer to confirmation code 4582389 approximately 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 http://www.deepwater.com/ and selecting "Investor Relations." A file containing four charts that may be discussed during the conference call, titled "2Q12 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 http://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 August 2, 2012, and can be accessed by dialing +1 719-457-0820 or +1 888-203-1112 and referring to the confirmation code 4582389. 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.

About Transocean

Transocean is a leading international provider of offshore contract drilling services for oil and gas wells. We own or have partial ownership interests in and operate a fleet of 128 mobile offshore drilling units consisting of 49 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh-Environment semisubmersibles and drillships), 25 Midwater Floaters, 10 High-Specification Jackups, 43 Standard Jackups and one swamp barge. In addition, we have two Ultra-Deepwater Drillships and three High-Specification Jackups under construction. The company specializes in technically demanding sectors of the global offshore drilling business with a particular focus on deepwater and harsh environment drilling services, and believes that it operates one of the most versatile offshore drilling fleets in the world.

(1) Revenue efficiency is defined as actual revenue divided by the highest amount of total revenue which could have been earned during the relevant period(s). See the accompanying schedule entitled "Revenue Efficiency."

(2) Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in the company's fleet. See the accompanying schedule entitled "Utilization."

(3) Annual Effective Tax Rate is defined as income tax expense from continuing operations excluding various discrete items (such as changes in estimates and tax on items excluded from income before income tax expense) divided by income from continuing operations before income tax expense excluding gains on sales and similar items pursuant to the accounting standards for income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

(4) Effective Tax Rate is defined as income tax expense from continuing operations divided by income from continuing operations before income taxes. See the accompanying schedule entitled "Supplemental Effective Tax Rate Analysis."

For more information about Transocean, please visit the website at http://www.deepwater.com/.


TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)
(Unaudited)

		Three months ended June 30,						Six months ended June 30,
		2012			2011			2012			2011

Operating revenues
	Contract drilling revenues	$	2,390		$	2,096		$	4,610		$	4,056
	Other revenues		185			238			302			422
			2,575			2,334			4,912			4,478
Costs and expenses
	Operating and maintenance		2,357			1,528			3,820			2,905
	Depreciation and amortization		345			359			700			713
	General and administrative		79			66			148			133
			2,781			1,953			4,668			3,751
Loss on impairment			(12	)		(25	)		(239	)		(25	)
Gain (loss) on disposal of assets, net			55			(1	)		51			7
Operating income (loss)			(163	)		355			56			709

Other income (expense), net
	Interest income		13			5			28			20
	Interest expense, net of amounts capitalized		(183	)		(147	)		(363	)		(292	)
	Other, net		(6	)		(5	)		(24	)		(2	)
			(176	)		(147	)		(359	)		(274	)
Income (loss) from continuing operations before income tax expense			(339	)		208			(303	)		435
Income tax (benefit) expense			(29	)		77			(12	)		143
Income (loss) from continuing operations			(310	)		131			(291	)		292
Income (loss) from discontinued operations, net of tax			7			2			6			174

Net income (loss)			(303	)		133			(285	)		466
Net income (loss) attributable to noncontrolling interest			1			9			9			23
Net income (loss) attributable to controlling interest		$	(304	)	$	124		$	(294	)	$	443

Earnings (loss) per share-basic
	Earnings (loss) from continuing operations	$	(0.88	)	$	0.38		$	(0.85	)	$	0.84
	Earnings (loss) from discontinued operations		0.02			0.01			0.02			0.54
	Earnings (loss) per share	$	(0.86	)	$	0.39		$	(0.83	)	$	1.38

Earnings (loss) per share-diluted
	Earnings (loss) from continuing operations	$	(0.88	)	$	0.38		$	(0.85	)	$	0.84
	Earnings (loss) from discontinued operations		0.02			0.01			0.02			0.54
	Earnings (loss) per share	$	(0.86	)	$	0.39		$	(0.83	)	$	1.38

Weighted-average shares outstanding
	Basic		353			320			352			319
	Diluted		353			320			352			320

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)
(Unaudited)

			June 30, 2012			December 31, 2011
Assets
Cash and cash equivalents			$	3,964		$	4,017
Accounts receivable, net of allowance for doubtful accounts of $28 at June 30, 2012 and December 31, 2011				2,124			2,176
Materials and supplies, net of allowance for obsolescence of $81 and $73 at June 30, 2012 and December 31, 2011, respectively				676			627
Deferred income taxes, net				142			142
Assets held for sale				9			26
Other current assets				452			537
		Total current assets		7,367			7,525

Property and equipment				30,559			29,037
Property and equipment of consolidated variable interest entities				813			2,252
Less accumulated depreciation				9,165			8,756
	Property and equipment, net			22,207			22,533
Goodwill				3,099			3,217
Other assets				1,769			1,757
		Total assets	$	34,442		$	35,032

Liabilities and equity
Accounts payable			$	917		$	880
Accrued income taxes				121			89
Debt due within one year				2,772			1,942
Debt of consolidated variable interest entities due within one year				28			245
Other current liabilities				2,888			2,372
		Total current liabilities		6,726			5,528

Long-term debt				9,862			10,756
Long-term debt of consolidated variable interest entities				177			593
Deferred income taxes, net				487			519
Other long-term liabilities				1,581			1,893
		Total long-term liabilities		12,107			13,761

Commitments and contingencies
Redeemable noncontrolling interest				--			116

Shares, CHF 15.00 par value, 402,282,355 authorized, 167,617,649 conditionally authorized, and 373,830,649 and 365,135,298 issued at June 30, 2012 and December 31, 2011, respectively; 359,284,907 and 349,805,793 outstanding at June 30, 2012 and December 31, 2011, respectively				5,127			4,982
Additional paid-in capital				7,472			7,211
Treasury shares, at cost, 2,863,267 held at June 30, 2012 and December 31, 2011				(240	)		(240	)
Retained earnings				3,780			4,180
Accumulated other comprehensive loss				(516	)		(496	)
	Total controlling interest shareholders' equity			15,623			15,637
	Noncontrolling interest			(14	)		(10	)
		Total equity		15,609			15,627
		Total liabilities and equity	$	34,442		$	35,032

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(In millions)
(Unaudited)

			Three months ended June 30,						Six months ended June 30,
			2012			2011			2012			2011

Cash flows from operating activities
	Net income (loss)		$	(303	)	$	133		$	(285	)	$	466
	Adjustments to reconcile to net cash provided by operating activities
		Amortization of drilling contract intangibles		(12	)		(10	)		(23	)		(20	)
		Depreciation and amortization		345			359			700			713
		Share-based compensation expense		25			27			48			54
		Loss on impairment		12			25			239			25
		(Gain) loss on disposal of assets, net		(55	)		1			(51	)		(7	)
		(Gain) loss on disposal of discontinued operations, net		(10	)		--			(10	)		(169	)
		Amortization of debt issue costs, discounts and premiums, net		17			36			35			62
		Deferred income taxes		(26	)		12			(43	)		36
		Other, net		20			14			41			11
		Changes in deferred revenue, net		7			(3	)		(5	)		43
		Changes in deferred expenses, net		28			(48	)		(21	)		(84	)
		Changes in operating assets and liabilities		411			(206	)		374			(400	)
Net cash provided by operating activities				459			340			999			730

Cash flows from investing activities
	Capital expenditures			(236	)		(293	)		(496	)		(533	)
	Proceeds from disposal of assets, net			144			5			185			18
	Proceeds from disposal of discontinued operations, net			17			--			17			259
	Other, net			13			(27	)		25			(33	)
Net cash used in investing activities				(62	)		(315	)		(269	)		(289	)

Cash flows from financing activities
	Changes in short-term borrowings, net			(260	)		5			(260	)		56
	Proceeds from debt			--			--			--			5
	Repayments of debt			(173	)		(202	)		(320	)		(249	)
	Proceeds from restricted cash investments			84			--			192			--
	Deposits to restricted cash investments			(74	)		--			(116	)		--
	Distribution of qualifying additional paid-in capital			--			(254	)		(278	)		(254	)
	Other, net			8			3			(1	)		(4	)
Net cash used in financing activities				(415	)		(448	)		(783	)		(446	)

Net decrease in cash and cash equivalents				(18	)		(423	)		(53	)		(5	)
Cash and cash equivalents at beginning of period				3,982			3,772			4,017			3,354
Cash and cash equivalents at end of period			$	3,964		$	3,349		$	3,964		$	3,349

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS

			Operating Revenues (in millions) (1)
			Three months ended						Six months ended June 30,
			June 30, 2012		March 31, 2012		June 30, 2011		2012		2011
Contract Drilling Revenues
	High-Specification Floaters:
		Ultra Deepwater Floaters	$	1,141	$	1,092	$	1,005	$	2,233	$	1,849
		Deepwater Floaters		328		242		238		570		528
		Harsh Environment Floaters		264		255		181		519		331
	Total High-Specification Floaters			1,733		1,589		1,424		3,322		2,708
	Midwater Floaters			337		347		376		684		776
	Jackups:
		High-Specification Jackups		102		78		48		180		79
		Standard Jackups		200		189		230		389		459
	Total Jackups			302		267		278		569		538
	Other Rigs			7		6		8		13		14
Total Contract Drilling Revenues				2,379		2,209		2,086		4,588		4,036
Contract Intangible Revenue				11		11		10		22		20
Other Revenues
	Client Reimbursable Revenues			41		48		40		89		77
	Integrated Services and Other			6		-		15		6		30
	Drilling Management Services			138		69		183		207		315
Total Other Revenues				185		117		238		302		422
Total Company			$	2,575	$	2,337	$	2,334	$	4,912	$	4,478

			Average Daily Revenue (1)
			Three months ended						Six months ended June 30,
			June 30, 2012		March 31, 2012		June 30, 2011		2012		2011
	High-Specification Floaters:
		Ultra Deepwater Floaters	$	537,000	$	534,900	$	516,600	$	536,000	$	493,100
		Deepwater Floaters		379,200		357,800		396,400		369,800		396,200
		Harsh Environment Floaters		433,200		478,600		430,100		454,400		417,100
	Total High-Specification Floaters			481,600		488,800		479,900		485,000		460,800
	Midwater Floaters			295,800		275,600		333,000		285,200		322,400
	High-Specification Jackups			138,400		116,900		110,300		128,200		108,700
	Standard Jackups			89,900		91,200		111,700		90,500		110,400
	Other Rigs			77,800		73,300		76,400		75,600		74,900
Total Drilling Fleet			$	305,400	$	301,100	$	312,100	$	303,300	$	302,400

	(1) Average daily revenue is defined as contract drilling revenue earned per revenue earning day in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement of operations.

TRANSOCEAN LTD. AND SUBSIDIARIES
FLEET OPERATING STATISTICS (continued)

			Utilization (2)
			Three months ended			Six months ended June 30,
			June 30, 2012	March 31, 2012	June 30, 2011	2012	2011
	High-Specification Floaters:
		Ultra Deepwater Floaters	87%	83%	80%	85%	79%
		Deepwater Floaters	59%	47%	41%	53%	46%
		Harsh Environment Floaters	96%	84%	93%	90%	88%
	Total High-Specification Floaters		79%	71%	69%	75%	69%
	Midwater Floaters		52%	56%	54%	54%	57%
	High-Specification Jackups		84%	81%	56%	83%	48%
	Standard Jackups		55%	47%	43%	51%	43%
	Other Rigs		100%	98%	50%	99%	50%
Total Drilling Fleet			66%	61%	55%	64%	55%

	(2) Utilization is defined as the total actual number of revenue earning days in the period as a percentage of the total number of calendar days in the period for all drilling rigs in our fleet.

		Revenue Efficiency(3)
		Trailing Five Quarters and Historical Data

		2Q 2012	1Q 2012	4Q 2011	3Q 2011	2Q 2011	FY 2011	FY 2010

Ultra Deepwater		92.2%	89.4%	89.5%	86.4%	89.3%	87.7%	88.6%
Deepwater		92.1%	83.2%	88.1%	87.7%	93.9%	89.4%	90.3%
Harsh Environment Floaters		98.1%	97.8%	98.0%	94.4%	98.4%	97.4%	96.0%
Midwater Floaters		87.4%	90.8%	94.2%	90.8%	91.9%	92.6%	92.5%
High Specification Jackups		95.1%	93.4%	94.3%	97.3%	95.6%	95.6%	95.3%
Standard Jackups		97.3%	97.8%	96.4%	98.2%	98.4%	97.7%	97.3%
Others		99.4%	97.3%	98.6%	99.5%	97.6%	98.7%	98.4%

Total Fleet		92.5%	90.6%	91.9%	89.5%	92.1%	90.9%	91.7%

	(3) Revenue efficiency is defined as actual revenue divided by the highest amount of total revenue which could have been earned during the relevant period(s).

TRANSOCEAN LTD. AND SUBSIDIARIES
SUPPLEMENTAL EFFECTIVE TAX RATE ANALYSIS
(In US$ millions, except percentages)

		Three months ended									Six months ended
		June 30, 2012			March 31, 2012			June 31, 2011			June 30, 2012			June 30, 2011

Income (loss) from continuing operations before income taxes		$	(339	)	$	36		$	208		$	(303	)	$	435
	Add back (subtract):
	Litigation matters		750			--			--			750			--
	Gain on disposal of other assets, net		(64	)		--			--			(64	)		(9	)
	Loss on impairment of goodwill and other assets		12			227			25			239			25
	Loss on redeemed noncontrolling interest		14			11			--			25			--
	Other, net		--			1			--			1			5
Adjusted income from continuing operations before income taxes			373			275			233			648			456

Income tax (benefit) expense from continuing operations			(29	)		17			77			(12	)		143
	Add back (subtract):
	Loss on impairment		--			30			--			30			--
	Changes in estimates (1)		145			29			(13	)		174			(33	)
	Other, net		--			--			--			--			2
Adjusted income tax expense from continuing operations (2)		$	116		$	76		$	64		$	192		$	112

Effective Tax Rate (3)			8.6	%		47.2	%		37.0	%		4.0	%		32.9	%

Annual Effective Tax Rate (4)			31.1	%		27.6	%		27.5	%		29.6	%		24.6	%


(1)		Our estimates change as we file tax returns, settle disputes with tax authorities or become aware of other events and include changes in (a) deferred taxes, (b) valuation allowances on deferred taxes and (c) other tax liabilities.
(2)		The three and six months ended June 30, 2012 includes $5 million of additional tax expense (benefit) reflecting the catch-up effect of an increase (decrease) in the annual effective tax rate from the previous quarter estimate.
(3)		Effective Tax Rate is income tax expense divided by income before income taxes.
(4)		Annual Effective Tax Rate is income tax expense excluding various discrete items (such as changes in estimates and tax on items excluded from income before income taxes) divided by income before income taxes excluding gains and losses on sales and similar items pursuant to the accounting standards for income taxes and estimating the annual effective tax rate.

TRANSOCEAN LTD. AND SUBSIDIARIES
APPENDIX A

Correction of Errors in Previously Reported Consolidated Financial Statements

We perform assessments of our contingencies and corresponding assets for insurance recoveries on an ongoing basis to evaluate the appropriateness of our balances and disclosures for such contingencies and insurance recoveries. We establish liabilities for estimated loss contingencies when we believe a loss is probable and the amount of the probable loss can be reasonably estimated. We recognize corresponding assets for those loss contingencies that we believe are probable of being recovered through insurance. In performing these assessments in the three months ended June 30, 2012, we identified an error in our previously issued financial statements for the year ended December 31, 2011 and the three months ended March 31, 2012 related to the recognition of assets for insurance recoveries related to legal and other costs totaling $67 million and $37 million, respectively, which we have concluded should not have been recorded because they were not probable of recovery.

We assessed the materiality of this error in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"), using both the rollover method and the iron curtain method, as defined in SAB 108, and concluded the error, inclusive of other adjustments discussed below, was immaterial to prior years but could be material to the current year. Under SAB 108, if the prior year error that, if corrected in the current year, would be material to the current year, the prior year financial statements should be corrected, even though such correction previously was immaterial to the prior year financial statements. Correcting prior year financial statements for immaterial errors does not require our previously filed reports to be amended, but rather these corrections will be made the next time we file the prior period consolidated financial statements.

In addition to the adjustments in 2011 and 2012 related to the assets for insurance recoveries, we recorded other adjustments related to the years ended December 31, 2011 and 2010 and the three months ended March 31, 2012 to correct for immaterial errors for repair and maintenance costs, income taxes, discontinued operations, and the allocation of net income attributable to noncontrolling interest. These other adjustments were not previously recorded in the appropriate periods, as we concluded that they were immaterial to our previously issued consolidated financial statements.

For the three months ended March 31, 2012, the correction of these errors reduced income from continuing operations by $55 million and net income attributable to controlling interest by $32 million. For the three and six month periods ended June 30, 2011, correction of these errors reduced income from continuing operations by $31 million and $34 million, respectively, and net income attributable to controlling interest by $31 million and $22 million, respectively. For the year ended December 31, 2011, correction of these errors increased loss from continuing operations by $31 million and net loss attributable to controlling interest by $29 million. For the year ended December 31, 2010, correction of these errors reduced income from continuing operations by $19 million and net income attributable to controlling interest by $35 million. The summary of adjustments for increases and (decreases) to net income (loss) from continuing operations and net income (loss) attributable to controlling interest for the applicable periods were as follows (in millions):


		Three months ended					Six months ended			Years ended
	March 31, 2012			June 30, 2011			June 30, 2011			December 31, 2011			December 31, 2010

Legal and other costs	$	(37	)	$	(19	)	$	(30	)	$	(67	)	$	--
Repair and maintenance costs		--			(32	)		(48	)		11			(11	)
Income tax (expense) benefit		7			5			20			16			(4	)
Other immaterial adjustments, net		(25	)		15			24			9			(4	)
Net adjustment to income from continuing operations		(55	)		(31	)		(34	)		(31	)		(19	)
Net adjustment to income from discontinued operations, net of tax		14			--			(4	)		(14	)		--
Net adjustment to net income attributable to noncontrolling interest		9			--			16			16			(16	)
Net adjustment to net income attributable to controlling interest	$	(32	)	$	(31	)	$	(22	)	$	(29	)	$	(35	)

The effects of the corrections of the errors on our consolidated statements of operations and balance sheets are presented in the tables below. The corrections of the errors had no effect on our consolidated statements of comprehensive income (loss) other than the effect of the changes to net income (loss) for each period. The corrections of the errors had no effect on the previously reported amounts of operating, investing, and financing cash flows in our consolidated statements of cash flows.


TRANSOCEAN LTD. AND SUBSIDIARIES
APPENDIX A

Correction of Errors in Previously Reported Consolidated Financial Statements (continued)

		Three months ended March 31, 2012
		Previously reported			Adjustments			As adjusted
Operating revenues
	Contract drilling revenues	$	2,214		$	6		$	2,220
	Other revenues		117			--			117
			2,331			6			2,337
Costs and expenses
	Operating and maintenance		1,410			53			1,463
	Depreciation and amortization		351			4			355
	General and administrative		69			--			69
			1,830			57			1,887
Loss on impairment			(227	)		--			(227	)
Gain (loss) on disposal of assets, net			(4	)		--			(4	)
Operating income (loss)			270			(51	)		219

Other income (expense), net
	Interest income		15			--			15
	Interest expense, net of amounts capitalized		(180	)		--			(180	)
	Other, net		(7	)		(11	)		(18	)
			(172	)		(11	)		(183	)
Income (loss) from continuing operations before income tax expense			98			(62	)		36
Income tax (benefit) expense			24			(7	)		17
Income (loss) from continuing operations			74			(55	)		19
Income (loss) from discontinued operations, net of tax			(15	)		14			(1	)

Net income (loss)			59			(41	)		18
Net income (loss) attributable to noncontrolling interest			17			(9	)		8
Net income (loss) attributable to controlling interest		$	42		$	(32	)	$	10

Earnings (loss) per share-basic
	Earnings (loss) from continuing operations	$	0.16		$	(0.13	)	$	0.03
	Earnings (loss) from discontinued operations		(0.04	)		0.04			--
	Earnings (loss) per share	$	0.12		$	(0.09	)	$	0.03

Earnings (loss) per share-diluted
	Earnings (loss) from continuing operations	$	0.16		$	(0.13	)	$	0.03
	Earnings (loss) from discontinued operations		(0.04	)		0.04			--
	Earnings (loss) per share	$	0.12		$	(0.09	)	$	0.03

TRANSOCEAN LTD. AND SUBSIDIARIES

APPENDIX A

Correction of Errors in Previously Reported Consolidated Financial Statements (continued)

		Three months ended June 30, 2011									Six months ended June 30, 2011
		Previously reported			Adjustments			As adjusted			Previously reported			Adjustments			As adjusted
Operating revenues
	Contract drilling revenues	$	2,096		$	--		$	2,096		$	4,056		$	--		$	4,056
	Other revenues		238			--			238			422			--			422
			2,334			--			2,334			4,478			--			4,478
Costs and expenses
	Operating and maintenance		1,492			36			1,528			2,851			54			2,905
	Depreciation and amortization		359			--			359			713			--			713
	General and administrative		66			--			66			133			--			133
			1,917			36			1,953			3,697			54			3,751
Loss on impairment			(25	)		--			(25	)		(25	)		--			(25	)
Gain (loss) on disposal of assets, net			(1	)		--			(1	)		7			--			7
Operating income (loss)			391			(36	)		355			763			(54	)		709

Other income (expense), net
	Interest income		5			--			5			20			--			20
	Interest expense, net of amounts capitalized		(147	)		--			(147	)		(292	)		--			(292	)
	Other, net		(5	)		--			(5	)		(2	)		--			(2	)
			(147	)		--			(147	)		(274	)		--			(274	)
Income (loss) from continuing operations before income tax expense			244			(36	)		208			489			(54	)		435
Income tax (benefit) expense			82			(5	)		77			163			(20	)		143
Income (loss) from continuing operations			162			(31	)		131			326			(34	)		292
Income (loss) from discontinued operations, net of tax			2			--			2			178			(4	)		174

Net income (loss)			164			(31	)		133			504			(38	)		466
Net income (loss) attributable to noncontrolling interest			9			--			9			39			(16	)		23
Net income (loss) attributable to controlling interest		$	155		$	(31	)	$	124		$	465		$	(22	)	$	443

Earnings (loss) per share-basic
	Earnings (loss) from continuing operations	$	0.47		$	(0.09	)	$	0.38		$	0.89		$	(0.05	)	$	0.84
	Earnings (loss) from discontinued operations		0.01			--			0.01			0.55			(0.01	)		0.54
	Earnings (loss) per share	$	0.48		$	(0.09	)	$	0.39		$	1.44		$	(0.06	)	$	1.38

Earnings (loss) per share-diluted
	Earnings (loss) from continuing operations	$	0.47		$	(0.09	)	$	0.38		$	0.89		$	(0.05	)	$	0.84
	Earnings (loss) from discontinued operations		0.01			--			0.01			0.55			(0.01	)		0.54
	Earnings (loss) per share	$	0.48		$	(0.09	)	$	0.39		$	1.44		$	(0.06	)	$	1.38

TRANSOCEAN LTD. AND SUBSIDIARIES

APPENDIX A

Correction of Errors in Previously Reported Consolidated Financial Statements (continued)

		Year ended December 31, 2011									Year ended December 31, 2010
		Previously reported			Adjustments			As adjusted			Previously reported			Adjustments			As adjusted
Operating revenues
	Contract drilling revenues	$	8,380		$	(6	)	$	8,374		$	8,986		$	--		$	8,986
	Other revenues		762			--			762			480			--			480
			9,142			(6	)		9,136			9,466			--			9,466
Costs and expenses
	Operating and maintenance		6,956			45			7,001			5,074			15			5,089
	Depreciation and amortization		1,449			(4	)		1,445			1,536			--			1,536
	General and administrative		288			--			288			246			--			246
			8,693			41			8,734			6,856			15			6,871
Loss on impairment			(5,229	)		--			(5,229	)		(1,010	)		--			(1,010)
Gain (loss) on disposal of assets, net			4			--			4			257			--			257
Operating income (loss)			(4,776	)		(47	)		(4,823	)		1,857			(15	)		1,842

Other income (expense), net
	Interest income		44			--			44			23			--			23
	Interest expense, net of amounts capitalized		(621	)		--			(621	)		(567	)		--			(567	)
	Other, net		(81	)		--			(81	)		(23	)		--			(23	)
			(658	)		--			(658	)		(567	)		--			(567	)
Income (loss) from continuing operations before income tax expense			(5,434	)		(47	)		(5,481	)		1,290			(15	)		1,275
Income tax (benefit) expense			395			(16	)		379			336			4			340
Income (loss) from continuing operations			(5,829	)		(31	)		(5,860	)		954			(19	)		935
Income (loss) from discontinued operations, net of tax			197			(14	)		183			34			--			34

Net income (loss)			(5,632	)		(45	)		(5,677	)		988			(19	)		969
Net income (loss) attributable to noncontrolling interest			93			(16	)		77			27			16			43
Net income (loss) attributable to controlling interest		$	(5,725	)	$	(29	)	$	(5,754	)	$	961		$	(35	)	$	926

Earnings (loss) per share-basic
	Earnings (loss) from continuing operations	$	(18.40	)	$	(0.05	)	$	(18.45	)	$	2.88		$	(0.11	)	$	2.77
	Earnings (loss) from discontinued operations		0.61			(0.04	)		0.57			0.11			--			0.11
	Earnings (loss) per share	$	(17.79	)	$	(0.09	)	$	(17.88	)	$	2.99		$	(0.11	)	$	2.88

Earnings (loss) per share-diluted
	Earnings (loss) from continuing operations	$	(18.40	)	$	(0.05	)	$	(18.45	)	$	2.88		$	(0.11	)	$	2.77
	Earnings (loss) from discontinued operations		0.61			(0.04	)		0.57			0.11			--			0.11
	Earnings (loss) per share	$	(17.79	)	$	(0.09	)	$	(17.88	)	$	2.99		$	(0.11	)	$	2.88

TRANSOCEAN LTD. AND SUBSIDIARIES

APPENDIX A

Correction of Errors in Previously Reported Consolidated Financial Statements (continued)

			December 31, 2011									December 31, 2010
			Previously reported			Adjustments			As adjusted			Previously reported			Adjustments			As adjusted
Assets
Cash and cash equivalents			$	4,017		$	--		$	4,017		$	3,394		$	(40	)	$	3,354
Accounts receivable, net
	Trade			2,049			--			2,049			1,653			--			1,653
	Other			127			--			127			190			--			190
Materials and supplies, net				627			--			627			514			--			514
Deferred income taxes, net				142			--			142			115			--			115
Assets held for sale				26			--			26			--			--			--
Other current assets				621			(84	)		537			329			43			372
		Total current assets		7,609			(84	)		7,525			6,195			3			6,198

Property and equipment				29,037			--			29,037			26,721			--			26,721
Property and equipment of consolidated variable interest entities				2,252			--			2,252			2,214			--			2,214
Less accumulated depreciation				8,760			(4	)		8,756			7,616			--			7,616
	Property and equipment, net			22,529			4			22,533			21,319			--			21,319
Goodwill				3,205			12			3,217			8,132			--			8,132
Other assets				1,745			12			1,757			1,165			--			1,165
		Total assets	$	35,088		$	(56	)	$	35,032		$	36,811		$	3		$	36,814

Liabilities and equity
Accounts payable			$	880		$	--		$	880		$	832		$	--		$	832
Accrued income taxes				89			--			89			109			--			109
Debt due within one year				1,942			--			1,942			1,917			--			1,917
Debt of consolidated variable interest entities due within one year				97			148			245			95			148			243
Other current liabilities				2,350			22			2,372			883			12			895
		Total current liabilities		5,358			170			5,528			3,836			160			3,996

Long-term debt				10,756			--			10,756			8,354			--			8,354
Long-term debt of consolidated variable interest entities				741			(148	)		593			855			(148	)		707
Deferred income taxes, net				523			(4	)		519			575			10			585
Other long-term liabilities				1,903			(10	)		1,893			1,791			--			1,791
		Total long-term liabilities		13,923			(162	)		13,761			11,575			(138	)		11,437

Commitments and contingencies
Redeemable noncontrolling interest				116			--			116			25			16			41

Shares				4,982			--			4,982			4,482			--			4,482
Additional paid-in capital				7,211			--			7,211			7,504			--			7,504
Treasury shares, at cost				(240	)		--			(240	)		(240	)		--			(240	)
Retained earnings				4,244			(64	)		4,180			9,969			(35	)		9,934
Accumulated other comprehensive loss				(496	)		--			(496	)		(332	)		--			(332	)
	Total controlling interest shareholders' equity			15,701			(64	)		15,637			21,383			(35	)		21,348
	Noncontrolling interest			(10	)		--			(10	)		(8	)		--			(8	)
		Total equity		15,691			(64	)		15,627			21,375			(35	)		21,340
		Total liabilities and equity	$	35,088		$	(56	)	$	35,032		$	36,811		$	3		$	36,814