Diamond Offshore Drilling (DO) Q3 2011 Earnings Call October 20, 2011 10:00 am ET Executives Darren Daugherty - Lawrence R. Dickerson - President, Chief Executive Officer, Director and Member of Executive Committee Michael D. Acuff - Vice President of Contracts and Marketing Morrison R. Plaisance - Vice President of Contracts & Marketing Unknown Executive - Gary T. Krenek - Chief Financial Officer and Senior Vice President Analysts Douglas L. Becker - BofA Merrill Lynch, Research Division John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division Michael W. Urban - Deutsche Bank AG, Research Division Geoff Kieburtz - Weeden & Co., LP, Research Division Robin E. Shoemaker - Citigroup Inc, Research Division David Wilson - Howard Weil Incorporated, Research Division Darren Gacicia - Morgan Stanley G. Scott Burk - Canaccord Genuity, Research Division Judson E. Bailey - Jefferies & Company, Inc., Research Division Presentation Operator
A discussion of the risk factors that could impact these areas and the company's overall business and financial performance can be found in the company's 10-K and 10-Q filings with the SEC. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements. Forward-looking statements reflect circumstances at the time they're made, and the company expressly disclaims any obligation to update or revise any forward-looking statements.After we have discussed our results, we'll have a question-and-answer session. [Operator Instructions] And now I will turn the meeting over to Larry. Lawrence R. Dickerson Thank you, Darren. Welcome also to our third quarter conference call. I'd like to talk just a little bit about the contracts that we've signed in the quarter. They have been disclosed all along as we report our contract backlog every 2 weeks, but it's appropriate time to look back upon them. And I think we summarized them in the press release that we added 14 new contracts with 18 rig years and $1.3 billion of revenue backlog. And I think those, really, if we look at them by market, I think Mexico is significant for us. We signed 4 contracts in this period, running up here to just a few days into October. The Summit, which is already been down there achieved a 2.7 year extension at a nice rate. And then we brought 2 rigs out of Brazil, the Yorktown and the Scepter. Yorktown will be going down there. Yorktown's a semi for 2.5 years rate in the 180s. And then the Scepter, a newly constructed jack-up, which had been working in Brazil. We had some permit issues down there, and so we arranged to be released. We'll come up here and work this end of the market, hopefully, while they get everything straightened out down in Brazil.
And then these 2 rigs were also joined by the Ocean Titan, a 350-foot unit that they have been working in the Gulf of Mexico, which obtained 2.1 years of backlog. So Mexico has been building for some time with bidding contracts out, but actual activity has been down. But the ongoing depletion of their fields and the needs to get some work done have continued to push them in this direction. And so it's been very beneficial for Diamond and I believe some our competitors as well have put a number and expect that, that's an important market.In the North Sea, we signed our 2 floaters that we have in there, the Ocean Nomad and the Ocean Princess, to contracts that take us through the winter. The Nomad is working for BG, and the Ocean Princess signed a 600-day approximate contract with Enquest which will start shortly. Then in Brazil, most of our backlog came from extensions to existing contracts, Petrobras took the Ocean Valor and Ocean Baroness contracts, which had been 3-year contracts and they had an option to extend them to 5 years and they took advantage of that. So that added quite a bit of backlog. And then also our other good customer down there, OGX, put one year extensions in each of the Quest and Star. So those 4 markets or 3 markets, Brazil, North Sea and Mexico, have been very strong for us. That really releases our Gulf of Mexico fleet now to just 3 active rigs, 2 floaters and 1 jack-up. We have one floater that's down just coming out of the shipyards, so we only have 2 rigs working today. The permit situation is certainly improving, and we see some optimism out there in some of the big contracts that have been signed. However, on the coal phase, when we deal with customers on a day-to-day basis, we still deal with many people that don't know the permit situation that are waiting on permits. It's not at a smooth flow situation, which we really need to encourage ongoing work. It sort of started to stop. So hopefully, we'll continue to make progress in there. But at the end of the day, we just don't have that many rigs left in that market. The Ocean Victory is a rig that we have that's a 5,000-foot capable rig that's drilling in the 3,000-foot level. And really there's very, very few rigs left there in that category. Read the rest of this transcript for free on seekingalpha.com