November 2, 2020
- Total contract drilling revenues were $773 million (total adjusted contract drilling revenues of $830 million), compared with $930 million in the second quarter of 2020 (total adjusted contract drilling revenues of $983 million);
- Revenue efficiency(1) was 96.6%, compared with 97.2% in the prior quarter;
- Operating and maintenance expense was $470 million, compared with $525 million in the prior period;
- Net income attributable to controlling interest was $359 million, $0.51 per diluted share, compared with net loss attributable to controlling interest of $497 million, $0.81 per diluted share, in the second quarter of 2020;
- Adjusted net loss was $69 million, $0.11 per diluted share, excluding $428 million of net favorable items. This compares with adjusted net loss of $1 million, in the previous quarter;
- Adjusted EBITDA was $338 million, compared with adjusted EBITDA of $418 million in the prior quarter; and
- Contract backlog was $8.2 billion as of the October 2020 Fleet Status Report.
Third quarter 2020 results included net favorable items of $428 million, or $0.62 per diluted share, as follows:
- $449 million, $0.65 per diluted share, gain on restructuring and retirement of debt; and
- $45 million, $0.07 per diluted share, related to discrete tax items.
- $61 million, $0.09 per diluted share, loss on disposal of assets; and
- $5 million, $0.01 per diluted share, in restructuring costs.
Contract drilling revenues for the three months ended September 30, 2020, decreased sequentially by $157 million, primarily due to $177 million of revenues recognized in second quarter 2020 as a result of a legal settlement agreement with a customer for performance disputes, partially offset by higher revenues from increased utilization and an additional operating day.
Additionally, a non-cash revenue reduction of $57 million, was recognized in the third quarter as a result of contract intangible amortization associated with the Songa and Ocean Rig acquisitions. This compared to $53 million in the prior quarter.
Operating and maintenance expense was $470 million, compared with $525 million in the prior quarter. The sequential decrease was the result of decreased activity, lower costs related to the COVID-19 pandemic, and lower legal fees due to the aforementioned settlement in the third quarter, partially offset by higher in-service maintenance costs across our fleet.
General and administrative expense was $45 million, in line with the second quarter of 2020.
Interest expense, net of amounts capitalized, was $145 million, compared with $153 million, in the prior quarter. Interest income was $6 million, compared with $4 million in the previous quarter.
The Effective Tax Rate(2) was (7.0)%, down from (6.8)% in the prior quarter. The decrease was primarily due to tax benefits for the carryback of net operating losses in the U.S. as a result of the Coronavirus Aid, Relief, and Economic Security Act, which included the release of valuation allowances previously recorded, settlements and expirations of uncertain tax positions, and adjustments to our deferred taxes for operating structural changes in the U.S. offset by tax expense for an increase in the withholding tax rate in Angola and an increase in pre-tax book income. The Effective Tax Rate excluding discrete items was (45.6)% compared to (15.0)% in previous quarter.
Net cash provided by operating activities were $81 million, compared to $87 million in the prior quarter.
Third quarter 2020 capital expenditures of $65 million were primarily related to our newbuild drillships under construction coupled with capital upgrades for certain rigs in our fleet. This compares with $46 million in the previous quarter.
“Despite the challenges associated with COVID-19 and an active storm season in the Gulf of Mexico, we continued to operate at a high level in the third quarter, with strong uptime performance driving revenue efficiency in excess of 96%, resulting in quarterly Adjusted Revenue of $830 million,” said Jeremy Thigpen, President and Chief Executive Officer. “Importantly, through the efficient conversion of our industry leading $8.2 billion backlog, we delivered Adjusted EBITDA Margins of 41%, which enabled us to generate $81 million in Operating Cash Flows.”
Thigpen added, “With our backlog, strong operating performance, and our recent liability management transactions, we have sufficient liquidity to continue to invest in our workforce, our assets and the development of new and differentiating technologies. As we approach the end of the year, we are growing increasingly encouraged by the contracting activity that could unfold in the second half of 2021. Our high‑specification fleet and our reputation for delivering safe, reliable and efficient operations will enable us to build upon our position as the leader in ultra‑deepwater and harsh environment drilling.”