May 7, 2015
Executives
R. Thaddeus Vayda - Vice President-Investor Relations & Communications Jeremy D.
Thigpen - President & Chief Executive Officer Esa Ikäheimonen - Chief Financial Officer & Executive Vice President Terry B. Bonno - Senior Vice President-Marketing
Analysts
Ian Macpherson - Simmons & Co. International J.B.
Lowe - Cowen & Co. LLC Judson E.
Bailey - Wells Fargo Securities LLC David C. Smith - Heikkinen Energy Advisors Vivek Pal - Jefferies LLC
Operator
Good day, and welcome to the Transocean Q1 2015 earnings conference call. Today's conference is being recorded.
At this time I would like to turn the conference over to Thad Vayda. Please go ahead, sir.
R. Thaddeus Vayda - Vice President-Investor Relations & Communications
Thank you, Alicia. Good day, and welcome to Transocean's first quarter 2015 earnings conference call.
A copy of the press release covering our financial results along with supporting statements and schedules including reconciliations and disclosures regarding non-GAAP financial measures are posted on the company's web site at deepwater.com. Joining me on this morning's call are Jeremy Thigpen, President and Chief Executive Officer; Esa Ikäheimonen, Executive Vice President and Chief Financial Officer; and Terry Bonno, Senior Vice President, Marketing.
During the course of this call, participants may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts. Such statements are based upon the current expectations and certain assumptions of management and are therefore, subject to certain risks and uncertainties.
Many factors could cause actual results to differ materially. Please refer to our SEC filings for more information regarding our forward-looking statements including the risks and uncertainties that could impact our future results.
Also please note that the company undertakes no duty to update or revise forward-looking statements. Finally, to give more people an opportunity to participate in this call, please limit your questions to one initial question and one follow-up.
Thank you. I will now turn the call over to Jeremy Thigpen.
Jeremy?
Jeremy D. Thigpen - President & Chief Executive Officer
Thank you, Thad, and a warm welcome to our employees, customers, investors and analyst who may be participating on today's call. Before we discuss the quarter's results, I'd like to take a moment to thank the Board of Directors of Transocean for entrusting me with this incredible responsibility and Ian Strachan for his leadership as interim CEO.
I'd also like to thank the employees and customers that I've met thus far for their unbelievably warm reception. I look forward to meeting more of you in the very near future as I embark on a tour of our operating hubs around the world.
Albeit my 16th day on the job I can tell you that I am truly excited and honored to be here. As many of you may know I spent most of my career in various capacities at National Oilwell Varco.
As Transocean was one of NOV's top customers, I had the privilege of seeing firsthand the company's commitment to safety innovation and operational excellence, which are values that I fully respect, embrace and support. Since arriving at Transocean I have been inspired by the talented, enthusiastic and dedicated team of employees that make up this great company and I'm delighted that I now have the opportunity to work side-by-side with the best people in the offshore drilling industry.
I fully recognize that market conditions are challenging, however, I will work closely with our customers and the Transocean team to continue to differentiate the company by efficiently delivering superior customer service and best-in-class operating performance. Through a heightened focus in these areas we will reinforce and enhance Transocean's premiere position in the offshore drilling industry.
Now to the results. As you saw from our earnings press release we reported another solid quarter with adjusted net income of $398 million or $1.10 per diluted share.
Including asset impairments, some of which are related to the scrapping of non-core assets, net loss attributable to controlling interest was $483 million or $1.33 per diluted share. Our first quarter operational performance demonstrates the company's significant progress on revenue efficiency, optimization of out of service time and related expenses and our onshore and offshore cost reduction initiatives.
Our fleet revenue efficiency was 95.9% and ultra-deepwater efficiency was an outstanding 97.2% the highest since mid-2009. This level of performance results from steps that the company has taken to improve maintenance and operations policies, procedures and processes, and the work that we've done with our supply partners to reduce equipment related downtime.
The company's operations teams including our rig crews are to be commended for their persistence and dedication to minimizing downtime on our rigs which benefits our customers and our shareholders alike. In addition to recognizable improvements in revenue efficiency, we continue to manage our onshore and offshore costs through the optimization of overhead and maintenance expenses.
As you would expect, we are actively consolidating and better aligning our shore-based infrastructure with our active fleet which is driving considerable costs out of our business. We're also doing a much better job of planning, organizing and executing our in-service maintenance as well as our shipyard repairs resulting in reductions in out of service time.
And we're continuing to be extremely selective and disciplined when it comes to shipyard expenditures where we are rephasing and deferring nonessential shipyard projects. It is important to stress that while we will continue to be near fanatical in our approach to cost management and waste elimination, under no circumstances will we allow these efforts to adversely impact the safe and environmentally responsible operations of our rigs.
As a direct result of the company's improved revenue efficiency and cost management efforts, our first quarter operating margin, which excludes depreciation and G&A expense, ranks among the best in recent quarters at 47%, a 550 basis point sequential improvement. In addition to improving our operating performance we're also taking tough but sensible decisions to rapidly stack rigs for which we see no appropriate near-term opportunities, and responsibly scrapping rigs that we see as economically and commercially nonviable in a cyclical recovery.
Consistent with our asset strategy, to date we've announced our intent to scrap 19 floaters and we will continue to evaluate the composition of our fleet as the market unfolds. So, while the near-term outlook, which Terry will address in a few moments, is certain challenging, I believe the company's first quarter results provide clear evidence of a Transocean team focused on improving those things within its control to best position the company for the eventual recovery.
I'd like to thank our employees around the world for achieving this notable result. Before handing it over to Esa, I would like to remind shareholders of our annual general meeting to be held next Friday, May 15, in Cham, Switzerland.
We recommend that shareholders vote affirmatively for each of the company's proposals. If you've not already done so, I encourage you to read our proxy and vote your shares.
Esa will now provide you with additional comments on the company's financial performance, after which Terry will provide some further perspective on the market. We will open up to questions thereafter.
Esa?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
Thank you, Jeremy, and good day to everyone. I will discuss the key elements for our Q1 results and then make some clarifications to our guidance.
For the first quarter of 2015 we reported a net loss attributable to controlling interest of $483 million or $1.33 per diluted share. The loss includes $881 million or $2.43 per share in net unfavorable items, including a non-cash charge of $481 million for impairment of the deepwater floater asset class and, as previously announced, a further $393 million impairment of non-core floaters that we intend to scrap.
Excluding these items our adjusted net income was $398 million or $1.10 per diluted share, a 16% improvement versus the prior quarter. Our first quarter results reflect our continued success in three areas of intense focus: utilization, revenue efficiency and cost management.
Consolidated revenues decreased by $194 million sequentially to $2.04 billion due mostly to reduced activity associated with asset disposals and stacked and idle rigs. This was mitigated by increased utilization and improved operating performance.
Fleet utilization was 79%, up from 73% in the prior quarter. Revenue efficiency was 95.9% in the period versus 95.3% in Q4.
Early second quarter indications suggest that the operating performance of our rigs continues to be better than our 2015 guidance of 95%. First quarter operating and maintenance expenses decreased by $226 million or 17% to $1.08 billion, demonstrating a further acceleration of our cost management efforts, including the optimization of maintenance and out of service costs and continued success in reducing the cost of idle rigs as they are released from contracts.
The quarter was also impacted by the disposal of non-core floaters. G&A decreased by $16 million to $46 million, primarily due to certain expenses associated with our cost management initiatives and some other items recorded in Q4 that were not repeated in this reporting period.
As evidence of our success in managing our costs, we estimate that we have achieved on an annual basis in excess of approximately $900 million in structural improvements due to our efforts over the past couple of years. The first quarter annual effective tax rate was 25.8% versus the full-year 2014 annual effective tax rate of 18.7%.
Recall that Transocean's annual effective tax rate will vary based on a number of factors, one of which is the overall level of pre-tax income. In other words, as pre-tax earnings decrease, our annual effective tax rate generally increases.
We ended the quarter with approximately $2.7 billion in cash and cash equivalents, largely in line with Q4. Cash flow from operations declined by $40 million to $526 million.
CapEx decreased by $117 million to $201 million due to lower project expenditure on the existing fleet, in line with our ongoing optimization of capital spending. I will now spend a few moments updating our 2015 outlook which reflects our confidence in continuing to achieve operational improvements and further reduce our costs.
Given favorable fleet operating performance throughout 2014 and so far this year, we still anticipate achieving revenue efficiency of 95%. Other revenues which primarily include reimbursables are expected to be between $125 million and $140 million.
We now anticipate that our full-year operating and maintenance expenses will be between $3.8 billion and $4.1 billion. This represents a substantial incremental reduction versus our full-year 2014 O&M costs and our initial expectations for this year, again, clearly highlighting the success of our cost management efforts across the company.
The decrease in expected 2015 O&M costs is partly due to scrapping of non-core assets and a material reduction in expenses associated with stacked floaters. We will continue to scrap non-core rigs that we conclude are no longer economically viable over the longer term as well as quickly move rigs to stacked condition as soon as it becomes clear that they have limited options for near-term follow-on work.
To the latter point we continue to optimize the cost of stacking ultra-deepwater rigs and have made significant progress in this regard. Indeed cost-effective stacking of these highly capable ultra-deepwater rigs is a key near-term issue for the industry.
We will also maintain a disciplined approach to shipyard expenditures, deferring discretionary projects associated with rigs that do not have firm backlog. As Jeremy already mentioned, we are performing an increasing amount of project work scope while rigs are in service reducing the frequency of shipyards and other planned out of service time.
A very good example of this is the recent five-year SBS on the Discoverer Luanda, which was completed in an industry-leading out of service time of nine days avoiding up to several weeks of additional out of service time. We expect that cost management initiatives and lower activity levels will each contribute approximately 50% to the estimated total year-over-year reduction in O&M costs and will continue to improve profitability and underlying cash flows, all else equal.
Due to seasonality as well as the number of planned shipyard days as noted in our recent fleet status report, we continue to expect O&M costs in the first half of 2015 to comprise up to 55% of the total for the year. Regarding 2016, the company is currently committed to only 48 days of planned out of service time.
We remain focused on a reduced cost structure that aligns with lower anticipated activity levels. We expect depreciation expense to be between $1.1 billion and $1.2 billion, a slight increase in the low end of our prior expectation that reflects a reduction in the salvage value of certain drilling rigs.
We forecast our G&A expenses in 2015 to decline to between $175 million and $195 million, a further reduction of some 12% compared with our earlier guidance, this reflects our continuous focus on overheads across organization to align with the smaller fleet. We expect interest expense net of interest income and capitalized interest to be between $430 million and $450 million.
Capitalized interest and interest income are expected to be approximately $130 million and $20 million, respectively. Our 2015 annual effective tax rate from continuing operations is expected to be within the range of 23% to 27%.
This expectation reflects an updated forecast for each of our rigs as well as includes known changes in legislation. As a further reminder, as pre-tax income decreases the annual effective tax rate will generally increase.
We now expect our 2015 capital expenditures to be slightly lower, at about $1.7 billion including $1.3 billion associated with our new build program. There's no change in our long-term objective of reducing gross spend levels to below $9 billion.
We will, however take steps as and when necessary to ensure appropriate liquidity and balance sheet flexibility for an uncertain market. Our targeted liquidity range of $3.25 billion to $4.25 billion is unchanged and includes our undrawn $3 billion revolving credit facility.
At the end of the first quarter our total liquidity was approximately $5.7 billion. We're also taking incremental measures to optimize our medium-term capital obligations.
As you know, our Board of Directors proposed a significantly reduced dividend of $0.60 per share for shareholder consideration at the upcoming AGM. Additionally, we have further deferred the delivery of our five newbuild high-specification jackups by 18 to 20 months each.
This is in addition to the six-month delay announced previously. This rephasing reduces our 2016 and 2017 capital obligations by approximately $210 million and $360 million respectively.
And as I already said, we will take more steps as necessary to ensure that we retain adequate balance sheet flexibility. Transocean Partners remains an important component of Transocean's financial structure and balance sheet flexibility.
However, as you know, the value of the company's units have, along with those of other similar companies, declined with oil prices. This, in conjunction with an increase in the cost of debt capital presents obvious, albeit likely short-term, challenges to the execution of drops that enhance the value of both Transocean and Partners.
We will keep you up-to-date on our plans in this regard. To conclude, we're very pleased with our recent successes around mitigating the reduced activity.
Even so, you should expect us to continue to aggressively manage our costs, improve our operating performance, and optimize our capital expenditures to increase our free cash flow. This finally concludes my comments, and I will now hand over to Terry to provide you with an update on market conditions.
Terry?
Terry B. Bonno - Senior Vice President-Marketing
Thanks, Esa, and good day to everyone. The market continues to be very challenging.
The low commodity price environment, corresponding reduction in customer budgets, and overcapacity in the global floater and jackup fleet are negatively impacting utilization and pricing in every market around the world. There's currently very little visible 2015 demand, and over the last quarter only a few fixtures have been executed in all asset classes.
Since our last call we added firm term on the Sedco Express, Transocean Prospect and Galaxy II and are in discussions to conclude more contracts shortly. Our backlog as of April 16 was $19.9 billion, which provides a foundation to help us weather the storm until commodity prices are at levels that better support our customers' offshore programs and demand for our rigs.
In the near to medium term we expect ultra-deepwater day rates and utilization to remain under pressure. Customers are keenly focused on cost-cutting efforts and are searching for opportunities to further reduce their 2015 and 2016 spending.
As we mentioned in February, we continue to advance discussions with multiple customers to capitalize on incremental term and maximize the utilization of particularly our higher-specification rigs. We expect these mutually beneficial arrangements will deliver more efficient performance at an optimized cost to our customers.
Overall, our entire fleet continues to deliver top-tier drilling performance but the revenue efficiency of our higher-specification units has been particularly strong. We congratulate our operations teams for their first class efforts in affording us the opportunity to showcase their successes.
Two notable examples are the Transocean Spitsbergen and the Deepwater Invictus. The Spitsbergen beat the drilling curve on the last well by over 25% for Statoil in Norway.
And the Invictus is delivering newbuild, best-in-class for initial well drilled for days per thousand foot by a significant margin in the U.S. Gulf of Mexico.
The differentiating performance provides value to our customers. The safe and efficient operations result in more wells in earlier production, all else equal.
Despite the unfavorable market conditions, we do see green shoot opportunities emerging for 2016 and 2017 programs in the U.S. Gulf of Mexico, South America, West Africa the Black Sea and India.
Indeed, recent discoveries in Romania, U.S. Gulf of Mexico, and India are increasing the likelihood that we may see incremental rig demand emerge from these regions in the medium-term.
Industry overcapacity continues to be a problem. However, there has been some good news.
In addition to the recent announcement that seven newbuild Sete rigs will be canceled, we expect that half of the announced 28 rigs are unlikely to be built and the remainder will probably be constructed over a longer timeframe than originally anticipated. In addition, ultra-deepwater newbuild deliveries are being delayed and the financial challenges of some of the drilling contractors has led, and may lead, to rigs being indefinitely stacked, and it also represents, in our view, an additional indication of a gradual correcting trend in the global rig oversupply situation.
These developments reinforce our comments of last quarter suggesting that the growth in supply of ultra-deepwater drilling units will likely slow in the near-term. Market utilization for the ultra-deepwater global fleet is around 90% largely due to the rapid stacking of rigs as they roll off contract.
There are approximately 17 ultra-deepwater rigs idle and available for prompt activity around the world, including several of our rigs which we are actively marketing. We expect to have some positive news soon.
As mentioned earlier, there are several opportunities around the globe for programs starting in 2016 and 2017. Although this is not new news, generally challenging market conditions are expected to persist over the next 12 months and we anticipate extended periods of inter-contract idle time and significant competition for the limited ultra-deepwater tendering opportunities available.
Deepwater and mid-water markets follow similar trends as the ultra-deepwater and remain weak. We will continue to see higher specification units compete for these lower spec jobs and, in turn push the older, less-efficient assets to the beach and in many cases ultimately to the scrapyard.
In this cyclical downturn we believe it's generally uneconomical to maintain some of the older, less-capable equipment in a long-term cold stacked condition to preserve optionality when the market improves. There has been very little fixture activity in the mid-water floater markets since year end, but we do continue to participate in tenders in India and Southeast Asia.
The harsh environment markets are also characterized by slow contracting activity and a few new fixtures. The impact of low oil price continues to pressure customers to execute contract terminations and suspensions in Norway and the UK in addition, to canceling and delaying programs.
As outlined below, 2015 will be challenging for the UK and Norway and we expect the market to remain oversupplied in the near-term. We are participating in a few tenders and direct negotiations for harsh environment work starting in 2016 and 2017.
So we remain confident in the long-term viability of these markets and the unique assets required to operate in these arenas. During 2015 we will have five floaters available in the UK and Norway.
And as you might expect, we are seeking opportunities globally for our harsh environment units. As noted in our last fleet status report, the Transocean Prospect will now work beyond the end of April for another several months at a rate of $298,000 per day.
The premium jackup market is exhibiting signs of pricing pressure with lower rates for newbuilds expected in Asia and West Africa. Day rates on the existing fleet continue to moderate with a large influx of uncontracted newbuilds challenging the less capable rigs.
That said, we expect that the newbuilds being offered by established contractors with a solid operating history will be preferred by our customers, all else being equal. Our customers remain confident in the long-term outlook for offshore oil and gas drilling, citing anticipated increases in global energy consumption and their ultimate mandate to replace reserves and increase production in a cost-effective, high return manner.
As in past cycles, the lack of drilling by customers is not sustainable and the inevitable catch-up is likely to result in a surprising rapid and robust increase in demand for rigs. In summary, we believe the trifecta of rig retirements, delivery delay and/or cancellation of newbuilds, as well as the various rig supply disruptions in Brazil can only aid in balancing the rig market.
That said, a bit of help is also needed from the commodity price and customer demand. We will continue to position our fleet to take advantage of the upturn when it arrives with a focus on high-grading the fleet.
We have the financial flexibility, unmatched operational and engineering strength, and passionate and talented teams that will help ensure we emerge from this downturn in the strongest possible position. This concludes my overview of the markets, so I will turn it back to you, Thad.
R. Thaddeus Vayda - Vice President-Investor Relations & Communications
Thanks, Terry. Now we'll open it up to Q&A and just as a reminder, one question and one follow up.
Alicia, go ahead and take the first caller in queue.
Operator
We'll go to Ian McPherson of Simmons.
Ian Macpherson - Simmons & Co. International
Hi. Thank you.
I think first of all, we all need to recalibrate our revenue efficiency modeling. Good quarter there, but I was curious if there's anything in the way of early termination settlements reflected in your contract drilling revenues in Q1.
If not, will we see those in your revenues going forward?
Terry B. Bonno - Senior Vice President-Marketing
Hello. Good morning, Ian.
How are you?
Ian Macpherson - Simmons & Co. International
Hi, Terry.
Terry B. Bonno - Senior Vice President-Marketing
In the first quarter we didn't have the early termination fee that is due on the – you're talking about the Sedco Energy. We're still working with the customer to conclude that and we should have that announced shortly, but I would just remind you that we are again in discussions with our customers where we have a larger fleet to be able to do some blending and extending and put together some very interesting packages in order to capitalize on additional terms.
So I would say that there might be an opportunity where we can capitalize on bits and pieces of the type of backlog that we have remaining available to us.
Ian Macpherson - Simmons & Co. International
Okay. Thanks.
And as a follow-up question, Esa, that's an awfully large reduction to your O&M guidance and I wonder if you could provide some context or framework in terms of what that – what incremental level of stackings or scrappings might be implied from that so we can adjust our revenues in tandem with your cost guidance?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
Yeah, thanks, Ian. Good question.
That would take a while to go through that in too much details and it's not part of our disclosure but I'll do some bridging in terms of what generates the $600 million to $700 million or close to 15% reduction in guidance. And you're right, the number one item has to do with the volume of our business.
So we are now expecting less rigs than we did three or four months ago to get re-contracted this year. It's by no means the only driver here and not necessarily even the dominant one.
Second big item here as part of that bridging is, that we've worked really hard and I think we've mentioned that before in the last six months or so, to find ways to reduce the transit periods between operations and stacking and subsequently scrapping if that's required and that's a big driver as well. So finding more cost-effective solutions and finding ways to accelerate scrapping and stack rigs at a lower level of cost is a big driver there.
And we are starting to master that art and that's taken a while but we're getting there, definitely. Third sizable driver is, some of the choices regarding our periodic maintenance, that's usually flagged as CapEx but a lot of our periodic survey activity actually gets expensed and that's also a significant cost driver.
And then finally which is the most pleasing element of it all, has to do with the new wave in cost savings, so that includes overheads, that includes better contribution from supply chain, that includes more scrutiny on the way we do maintenance and what we do in that arena. So really it's a mixed bag that actually adds up to a sizable number.
And it doesn't stop there. There's more that we can do and we will do more but that's it for 2015 in terms of our ability to provide guidance right now.
Operator
We'll take our next question from J.B. Lowe of Cowen & Company.
J.B. Lowe - Cowen & Co. LLC
Good morning, everyone. Jeremy, congratulations.
Welcome aboard. It's going to be fun.
Jeremy D. Thigpen - President & Chief Executive Officer
Thanks, J.B. I appreciate it.
J.B. Lowe - Cowen & Co. LLC
No problem. My first question is a general question about your overall fleet size.
As you guys are paring down your fleet with stacking and retirements, how do you view what your fleet is going to look like on the other end? How are you going to build it back up to what you see it being?
And what's the breakdown between floaters and jackups that you're seeing?
Terry B. Bonno - Senior Vice President-Marketing
Good morning, J.B. How are you doing?
J.B. Lowe - Cowen & Co. LLC
I'm well. Thanks, Terry.
Terry B. Bonno - Senior Vice President-Marketing
We're going through the process of high-grading our fleet and certainly when we see opportunities, for instance on the deepwater and mid-water asset classes of our fleet, our asset strategy originally was to remove these from our fleet, however method that was available to us at the time. But we're going to continue to do that and high-grade and obviously I would let Jeremy talk about his plans of being able to put us in a position of new opportunities.
But on the other side I think you're going to see certainly our high grading fleet continuing and we will be able to capitalize and when the market does turn on the optionality of certainly our fifth-generation fleet too, that are currently idle at the moment, but we certainly expect that we will be able to have that fleet all put back to work.
Jeremy D. Thigpen - President & Chief Executive Officer
Yes. J.B.
to elaborate on that, we've seen in land and we've certainly seen in offshore now that newer more efficient technology wins the day and those are the types of rigs that get the contracts, get the better day rates, and so we have been moving towards that over the last couple of years, and you'll see that continue. One of the good things about a market like this is that it helps to expedite that process by retiring some of the older technology that's no longer in demand, and so I think you'll see over time that you'll see much a more technologically advanced and more efficient fleet going forward.
J.B. Lowe - Cowen & Co. LLC
All right. Thanks for that.
Just as a quick follow-up I know this is kind of a moving target but given the biddable demand you're seeing in 2016 on the floater side, what do think the actual rig count demand would look like to be in 2016 given the drop off we've seen? I think that around 270 floaters active right now or contracted right now.
Where do you think that could kind of shake out next year?
Terry B. Bonno - Senior Vice President-Marketing
I think that if you look at the projections and you look at all the various research that is going on, the numbers that we are seeing or talking about today, and it's hard to make that projection. Right?
Because it's a moving target and the customers can continue to slide it to the right, but we can see somewhere in the range of between 220 and 230, and that's certainly we're optimistic in those numbers. But if all the demand came out that we currently see, or that we know that our customers have on their books then that kind of would be the range that you would think they could do but it's going to again depend on how well they are in their cost-cutting efforts and certainly their confidence in the commodity price.
Jeremy D. Thigpen - President & Chief Executive Officer
One thing I'd add to that is, we're hopeful but were not preparing for an uptick in the market. We're kind of preparing for this lower for longer and while we certainly hope to see contracts surface and opportunities surface next year, we're preparing for some pretty challenging times in front of us.
So upgrading the fleet, right-sizing the fleet, right-sizing the organization to support what we think is going to be lower activity.
Operator
We'll take our next question from Jud Bailey of Wells Fargo.
Judson E. Bailey - Wells Fargo Securities LLC
Thanks. Good morning.
You mentioned, Esa, optimizing your stacking costs on your DP rigs. Could you maybe go into a little more detail on, I guess, number one, what you've been able to do to optimize the cost and give you as a frame of reference on where you're able to get those costs down to for a stacked DP asset?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
Yes. I can give you a range, that's the best I can give because not all rigs are similar.
The low-end of that range is probably somewhere around $50,000, a bit more than that right now and at that the higher end of that range might be as high as $85,000, $90,000 a day. So you can figure out an average somewhere in between.
It's an area where we've made considerable progress in the recent past, and the numbers keep coming down, and we keep finding better ways of sort of lukewarm stacking the rig, if that's the right way of describing what we're trying to achieve. And on a really good day those numbers are reasonably manageable.
But it is still considerable burn, of course, and a big area and a big issue for the entire industry in the near- term. And we've put a lot of effort into that and we will continue optimizing and, on a rig by rig basis, do absolutely everything we can to keep it as low as possible.
Judson E. Bailey - Wells Fargo Securities LLC
Okay.
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
What is also important, and I kind of referred to that already, is the ability to bring the rig down from operations through a period of idleness to a stacking condition as quickly as possible because that does reduce the burn very considerably.
Judson E. Bailey - Wells Fargo Securities LLC
When you get it down to that, let's say, $50,000, or in that low range, the ability to bring – or an expense required to bring the rig back into service do feel like you're able to do that in a relatively short and cost-efficient manner or is it going to require more time and expenditure when you get the cost down to those levels?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
It depends on a couple of things, one is the length of the period during which the rig is stacked. The longer it is, the more likely it is that the reactivation is actually going to be a relatively costly exercise.
But this, generally speaking, is another area of optimization for us and we are anticipating and we are trying to find the most fit for purpose solutions for every rig that we've got stacked in preparation for the market to recover. So there's several elements, one is accelerating the downgrading of the status of the rig to a stacked condition.
Two is keeping the cost as low as possible and then anticipating and preparing for the reactivation and do it as cost efficiently as anyone ever can. But that varies a lot, the last piece varies a lot.
Operator
We'll go next to David Smith of Heikkinen Energy Advisors.
David C. Smith - Heikkinen Energy Advisors
Thank you. Congratulations on the very strong revenue numbers.
I was hoping you could remind us about the components of the fleet segment revenue that maybe aren't apparent in the fleet status reported day rates. I think there might be some bonus revenue, maybe how things like demobilization fees would flow through?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
I think actually the breakdown of our revenue on a dollars per day per rig class is available on our website so that's the best source of that information in addition to our 10-Q which provides some transparency on that. So I don't really have those numbers in front of me here and I'm not sure whether any of my colleagues do.
so it's a little bit difficult for us to respond to that.
David C. Smith - Heikkinen Energy Advisors
Sure. Okay.
I guess also I was wondering, the follow-up, if there was any interest from your side and/or the client side regarding potentially deferring the delivery of any of the five contracted drill ships under construction?
Terry B. Bonno - Senior Vice President-Marketing
Some of our – and the ones that are contracted, I assume that's what you're talking about, some of our customers have expressed some interest in and we're looking at what does that mean for us? How could that possibly play out?
So there are conversations ongoing but there has been nothing that's been executed to date.
Operator
We'll go next to Vivek Pal of Jefferies.
Vivek Pal - Jefferies LLC
Yeah, good morning, guys. Could you please talk a little bit about your cash burn for 2015 after the first quarter, which was, I think, little ahead of expectations?
The Street I believe has you burning about $750 million in cash this year on top of the $1 billion in debt maturity. Earlier you had mentioned that you're going to use cash on hand to fund this.
Has that changed? And next year is going to be a little more challenging?
If you can elaborate on your strategy and how to kind of meet your debt maturities and funding of the cash burn? Is a possibility of a secure debt or any monetizing of your contracts?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
It's Esa Ikäheimonen here. I'm just writing the questions down so that I can cover them all.
Okay. So the current situation is that, obviously, there's some element of lacking visibility as to where the market is headed so we're monitoring that very closely.
Our starting point is really strong for 2015 and I would expect that actually the analysts will probably update their liquidity forecast and cash flow forecast for this year based on our strong quarter as well as our guidance, so that's an element of the starting point, so there might be a change that we will see shortly. That's up to them, of course, and hopefully that will be in line with our thinking as much as possible.
Right now we've got close to $3 billion of cash and our cash generation, cash conversion is obviously improving all the time so our cash generation throughout 2015 is expected to be quite good. We don't have massive amounts of capital obligations in 2015 and you're right that we've got $900 million of repayments due towards the end of the year.
We have also demonstrated our ability to reschedule yard payments and we do very little in terms of existing rigs and shipyard expenditure, so we can and we will defer and eliminate CapEx as and when it makes sense. So there's quite a lot of short-term as well as medium-term flexibility.
That's what I'm saying, and that gives us options. So this year cash flow strong enough, liquidity very strong to start with; I should mention the $3 billion revolver as well and further flexibility in different areas.
So we've got options available and we do have multiple sources of capital readily available as well, if our medium/longer-term views will start devolving to a direction where we feel we need to accelerate some of that capital raising. So right now we're comfortable, we're confident in saying that options do exist and one of those options is we simply finance that debt repayment from existing cash reserves.
You asked about secured debt instruments: definitely it's part the potential funding mix going forward, there's no question about it. The pricing currently is very attractive in comparison with unsecured instruments, so when it comes to management of our debt portfolio, that is an option.
And I think, finally, you asked about potential monetization of our existing contracts? There's a reason why we established Transocean Partners and that is as a primary vehicle for us to monetize our contracts, but there are other ways of doing that, so we're obviously developing opportunities and options so that we would be in a position where we can optimize those, and as and when needed, pull the right one.
Vivek Pal - Jefferies LLC
That was very insightful. A quick question: you mentioned $3 billion in cash?
You a $2.7 billion so in the 45 days since the end of the first quarter you have added another $300 million or was it was just rounding from $2.7 billion to $3 billion?
Esa Ikäheimonen - Chief Financial Officer & Executive Vice President
It was rounding from the cash position today to $3 billion, so as I said, we're converting cash pretty effectively as we speak and therefore, we've seen a little improvement since the end of the quarter. Not quite $300 million, I should mention.
Operator
This does conclude our Q&A portion for today. I would like to turn the call back over to Mr.
Vayda for any additional or closing comments.
R. Thaddeus Vayda - Vice President-Investor Relations & Communications
Thanks very much for your participation today. We're available for any follow-up questions you might have for the balance of the afternoon.
We look forward to chatting with you again when we report our second quarter results. Have a good day.
Operator
That does conclude today's conference. We thank you for your participation.