NEW YORK ( TheStreet) - The long-term outlook for oil drillers may be optimistic but the second-quarter earnings season has gotten off to a rocky start.

Diamond Offshore's ( DO - Get Report) disappointing fleet status report on Thursday overshadowed an in line earnings. On Wednesday, Noble ( NE - Get Report) reported earnings of 21 cents per share, well below the Wall Street consensus, a disappointment caused by rig downtime previously reported by the company on July 6.

What the Noble and Diamond disappointments both have in common is the theme of fleet status disappointments from the drillers which impact market valuation more acutely than any long-term positive outlook for the sector.

Diamond Offshore shares fell by 3.5% on Thursday, as the energy sector climbed 1.5%. Noble was down, though only slightly, but its shares had already taken a tumble after its July 6 status report.

A potential increase in jackup rig activity and incrementally positive commentary on the deepwater business are expected to be highlights of second quarter commentary, but the simple fact is that more fleet downtime means less revenue and less earnings for the drillers.

Unless a rig is "cold-stacked" and the crew laid off, keeping full crews and conducting maintenance during downtime makes it impossible for drillers to reduce costs, even with expense improvements. In the case of Diamond, it means 2011 and 2012 models have to be taken down as its earnings power in the near-term weakens.

The downtime surprise from Diamond was significant. On June 14, when it last updated its fleet status, the driller expected 697 days of downtime in 2011 and 694 days of downtime in 2012. On Thursday, Diamond revised the fleet outlook to 1,004 days of downtime in 2011 and 869 days of downtime in 2012.

"This is an industry issue. Transocean, Noble and Diamond can always surprise people in a negative fashion," said CLSA Securities analyst Mark Urness. "There's more than expected downtime for Diamond and there's only one direction earnings can go. That's the nature of the business," he said.

Matthew Beeby, analyst at Global Hunter Securities, recommends Diamond and Noble as short ideas in a paired trade with Ensco ( ESV) and Atwood Oceanics ( ATW).

Atwood shares gained 1.6% on Thursday, while Ensco was rising by 0.6%.

Beeby expressed one note of concern about Ensco based on the early results from the drillers. Both Noble and Diamond Offshore have reported issues with Petrobras contracts. The pace of activity by the Brazilian oil giant has been a bone of contention with investors throughout this year, but disappointments related to specific contracts Petrobras has already signed with drillers had been less of a concern. In its acquisition of Pride, Ensco gained additional exposure to Petrobras contracts and that poses a risk based on the commentary on Petrobras from Noble and Diamond.

More generally, the driller tone has shifted on the Gulf of Mexico, too, from the last quarter when there was the expectation of continued growth in permitting. The tone from in its Halliburton ( HAL - Get Report)commentary on the Gulf of Mexico permitting activity was negative when it reported on Monday.

Atwood Oceanics has no Gulf of Mexico exposure, Global Hunter's Beeby noted, which is one of the reasons why he remains long Atwood shares.

-- Written by Eric Rosenbaum from New York.


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