Transocean Ltd took a $1 billion charge related to the 2010 Gulf of Mexico oil spill, the clearest indication yet that the contract driller is preparing to settle the case.
Shares of Transocean, owner of the world's largest offshore drilling fleet, rose 5 percent on its solid quarterly results, out on Monday, and the prospect of closing out a liability that has loomed for nearly two years.
The long-awaited trial over the Macondo well blowout that destroyed the company's Deepwater Horizon rig, which had been working for BP, was delayed by a week on Sunday so the parties could work toward a settlement.
"Though we're still interested in finding an acceptable resolution that allows us to put all of the remaining uncertainty behind us, we are well prepared to argue the merits of our case at the trial which is currently scheduled to begin next week," Chief Executive Steven Newman said on a conference call to discuss the fourth-quarter results.
The $1 billion loss contingency associated with the Gulf of Mexico spill will be adjusted to reflect new information and future developments as they become known.
Barclays analysts said the market had expected a charge of about $3 billion and, like many others, anticipated a settlement amount emerging in the days ahead.
"We had thought there was a 50/50 chance for a settlement before the trial but view the delayed trial start date as highly encouraging," UBS analyst Angie Sedita said.
Transocean also took an estimated non-cash charge of $5.2 billion, or $15.83 per share, in the fourth quarter resulting from goodwill impairment associated with its contract drilling services unit.
Its fourth-quarter net loss widened to $6.12 billion, or $18.62 per share, from $799 million, or $2.51 per share, last year.
Excluding one-time items, it had a profit of 24 cents a share, 4 cents above the average estimate among analysts polled by Thomson Reuters I/B/E/S.
It was Transocean's first earnings beat since the Deepwater Horizon disaster.
Fourth-quarter revenue rose 14 percent to $2.4 billion, partly due to two semi-submersible rigs that Transocean added when it bought Aker Drilling last year.
The company cited higher utilization, mainly for its deepwater fleet, which had many rigs in the shipyard a year ago. Transocean expects ample demand to absorb the few dozen new rigs being built industry wide, with Brazil's Petrobras likely to seek more soon and estimates for another 20 needed off West Africa.
Transocean said revenue efficiency, a measure of how much was actually earned against what could have been earned, rose to 92 percent in the fourth quarter after dropping below 90 percent in the third quarter. The company expects a gradual improvement back toward the 94 percent level of 2009, though it said that could take several years.
Transocean said last week it would drop its dividend to keep its finances in order, in the face of increasing downtime for its rigs as they face tighter regulatory scrutiny following the Macondo disaster.
Last week, rival Ensco Plc posted a higher-than-expected quarterly profit while warning of rising costs.
Transocean expects average operating costs to rise 6 percent in 2012.
Transocean shares, which have lost 37 percent of their value in the last year, rose 5.3 percent to $53.41 in midday trade on Monday.
(Reporting by Braden Reddall in San Francisco and Swetha Gopinath in Bangalore; editing bny John Wallace)