UPDATE 3-Transocean posts loss on rising costs, shares fall

Wed Nov 2, 2011 6:42pm EDT

* Q3 loss of 22 cents/shr vs profit of $1.15/shr year ago

* Revenue down 2 pct, costs up 28 pct from year ago

* Shares drop 7 percent after hours

By Braden Reddall

Nov 2 (Reuters) - Transocean Ltd , the largest offshore drilling contractor, reported on Wednesday an unexpected quarterly loss on a rise in shipyard costs, knocking another 7 percent off its battered shares.

It has now failed to meet Wall Street's expectations for the past six quarters, since the Gulf of Mexico well blowout that destroyed a Transocean rig triggering an oil spill that shook up the entire U.S. offshore drilling industry.

Transocean's operating and maintenance costs were $1.54 billion in the third quarter, up 3 percent from the previous period and 28 percent from a year ago, primarily due to repairs, equipment certification and shipyard work.

Its third-quarter net loss was $71 million, or 22 cents per share, compared with a profit of $368 million, or $1.15 per share, a year ago. Revenue fell 2 percent to $2.24 billion, below analysts' average estimate of $2.36 billion, according to Thomson Reuters I/B/E/S.

"When you miss by that much, it's a surprise," said Brian Youngberg, an analyst at Edward Jones, adding that costs were $100 million over his estimate.

Despite Transocean's dividend and the industry's generally positive outlook for next year, Youngberg believes investors will grow even more wary of the stock, which has underperformed its peers so far this year.

The rates paid by clients for rigs have generally improved in the past year. But the second quarter proved a false dawn for the key Transocean metric of revenue efficiency, which is revenue actually booked out of the total that could have been earned.

Revenue efficiency in the third quarter fell below 90 percent, reversing a rise to 92 percent that was deemed merely good progress on the way back toward the 94 percent of 2009.

Diamond Offshore Drilling Inc managed to beat profit estimates last month, though partly at the expense of its fourth quarter, while rival Noble Corp overcame disappointing numbers with an upbeat outlook.

Ensco Plc , London-based owner of the second-largest offshore rig fleet, is due to report its financial results overnight, while Seadrill's are due at the end of this month.

Transocean and Ensco will hold conference calls with investors and analysts on Thursday to discuss their results.

Shares of Switzerland-based Transocean were down 7 percent at $52.03 in after-hours trading on the New York Stock Exchange, following the release of the results.

Transocean had lost a fifth of its value in 2011, while Diamond is down 4 percent, and Ensco has shed 9 percent.

The company is locked in a legal dispute with BP Plc over liability for the Macondo disaster that destroyed its Deepwater Horizon rig in the Gulf of Mexico in April 2010. On Tuesday, Transocean asked a U.S. judge to order BP to cover all the damages and costs arising from the resulting spill.

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