UPDATE 3-Transocean profit slides, falls short of estimates

Wed Aug 3, 2011 6:26pm EDT

* Q2 EPS ex-items 63 cents vs 78 cents expected by Wall St

* Revenue down 6 pct at $2.33 bln, as expected

* Backlog down slightly in past 3 months, outlook improved

* Shares down 2 pct (Adds analyst view of costs, detail on profit charge)

By Braden Reddall

SAN FRANCISCO, Aug 3 (Reuters) - Transocean Ltd (RIGN.VX) (RIG.N), the largest offshore rig contractor, reported a profit that fell short of expectations as costs rose faster than the drilling industry recovered, and its shares fell 2 percent.

The offshore contracting market is picking up after its supply and demand fell out of balance because of the regulatory response to last year's Gulf of Mexico disaster. The deepwater well blowout destroyed a Transocean rig drilling for BP Plc (BP.L).

Transocean said on Wednesday its second-quarter net profit fell 78 percent to $155 million, or 48 cents per share, from $715 million, or $2.22 per share, a year before.

Excluding charges, Transocean earned 63 cents per share, compared with the average analyst estimate of 78 cents, according to Thomson Reuters I/B/E/S. Revenue fell 6 percent to $2.33 billion, in line with the average analyst estimate.

One of the charges was a $25 million writedown of three jackup rigs that Transocean is holding for sale in an effort to improve the profile of its fleet. [ID:nN31126320]

Operating and maintenance costs were $1.49 billion in the quarter, up by about $130 million from the previous quarter, primarily due to higher maintenance expenses and increased drilling activity, the company said in a statement.

UBS analyst Angie Sedita said the operating costs were $33 million more than she had forecast.

As of July 13, Transocean's contract backlog had fallen to $23.6 billion from $24.6 billion three months before, but it expects high oil prices to lead to more contract opportunities across its fleet this year and next.

"We expect utilization and day rates for all classes within our drilling fleet to remain steady or improve over the next few quarters as a result of rising oil and gas prices and our customers' increased exploration and production expenditures," the company said in a filing with U.S. securities regulators.

Switzerland-based Transocean will hold a conference call with investors and analysts on Thursday to discuss the results.

The stock fell 2 percent to $58 in after-hours trading on Wednesday.

Diamond Offshore Drilling Inc (DO.N) fell short of estimates with its profits last month, while rival Noble Corp's (NE.N) numbers disappointed because of service interruptions. Both expect more rig downtime as a result of regulatory scrutiny and greater well complexity. [ID:nN1E76K0S0]

Ensco Plc (ESV.N), now operator of the world's second-largest offshore rig fleet, and Seadrill (SDRL.OL) are due to report results later this month. (Reporting by Braden Reddall; Editing by Robert MacMillan and Carol Bishopric)

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