(Bloomberg) -- Transocean Ltd. surprised analysts by slashing its way to profitability in the second quarter as the world’s largest owner of offshore rigs tries to keep up with dwindling drilling demand from explorers.

The company based in Vernier, Switzerland, reported earnings of 17 cents a share, excluding certain items, according to a statement Wednesday. That was better than the average 2-cent loss estimated by 33 analysts surveyed by Bloomberg. Chief Executive Officer Jeremy Thigpen eliminated $1 out of every $4 in operating and maintenance costs during the quarter, as compared to the first three months of the year.

"The operating and maintenance expense was quite a bit below what we were expecting," Rob Desai, an analyst at Edward Jones in St. Louis who rates the shares a sell and owns none, said in a phone interview. "I think that’s really all that’s responsible for the beat."

Offshore rig contractors have been among the hardest hit in the industry, with customers slashing spending while new drilling vessels continue to enter an oversupplied market. Transocean announced on Monday it agreed to buy out the public stakes in Transocean Partners LLC for $249 million in an effort to cut costs and boost liquidity.

"Utilization is still declining at almost 5 percent per quarter, and contracting is essentially next to zero," Marc Edwards, chief executive officer at Diamond Offshore Drilling Inc., told analysts and investors Monday on a conference call. "Before we can declare a bottom, we at least need to see a level of fixture awards that matches a number of contracts that are reaching the end of their term. And for our industry sector, this has yet to happen."

Shrinking Profit

Transocean’s net income shrank to $77 million, or 21 cents a share, from $342 million, or 93 cents, a year earlier, according to the statement.

Brent crude, the global benchmark, is still down by more than half since the downturn began in the middle of 2014. Roughly around the same time that oil prices began falling, Transocean announced plans to create Transocean Partners, selling stakes in three deepwater rigs to the tax-free partnership.

“Transocean Partners was formed so that Transocean would be able to monetize drilling contracts by selling the ownership interests,” Andrew Cosgrove, analyst at Bloomberg Intelligence, said in an interview. “Under the current conditions, it’s not economic to use Transocean Partners for the reason it was created.”

The earnings were released after the close of regular trading in New York. Transocean, which has 2 buy ratings from analysts, 11 holds and 23 sells, rose 1.5 percent in after-hours trading, to $10.61 at 5:40 p.m. in New York.

(Transocean is scheduled to hold an earnings conference call Thursday at 9 a.m. New York time, accessible at EVTS.)

(Corrects day of the week in second paragraph.)

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