Diamond Offshore Announces Third Quarter 2012 Results

Diamond Offshore Drilling, Inc. (NYSE: DO) today reported net income for the third quarter of 2012 of $178 million, or $1.28 per share on a diluted basis, compared with net income of $257 million, or $1.85 per share on a diluted basis, in the same period a year earlier. Revenues in the third quarter of 2012 were $729 million, compared with revenues of $878 million in the third quarter of 2011.

Since the start of the third quarter of 2012, the Company entered into 13 new agreements that are expected to generate maximum total revenue of approximately $1.7 billion and 12.1 rig-years of contract drilling backlog. Significant among these awarded contracts are the following:
  • The Ocean Endeavor was awarded an 18-month contract at a dayrate of $505,000, plus a potential 6.6% performance bonus. The dayrate on the current contract is $285,000. The customer name and location of rig operation have not yet been announced.
  • The Ocean Lexington was awarded a 477-day job in Trinidad at a rate of $300,000 per day versus its current rate of $277,000 per day. The rig will be mobilized to Trinidad upon completion of its current contracted term in Brazil.
  • The Ocean Valiant received a two-well contract extension for work offshore Equatorial Guinea. The new rate will be $515,000 per day versus the current contract rate of $375,000 per day.
  • The Ocean America was awarded an 18-month contract for work offshore Australia at a dayrate of $475,000. The rig is currently contracted at a rate of $405,000 per day.

“We posted excellent operating results for the quarter and announced several new contracts at strong dayrates across all ranges of water depths,” said Larry Dickerson, President and Chief Executive Officer of Diamond Offshore. “Our results for the quarter benefited from lower than anticipated operating expense, primarily owing to our continued emphasis on controlling costs.”

“During the quarter, we entered into a $750 million revolving credit facility, which will provide additional flexibility to our already strong balance sheet, as we complete construction of six new rigs over the next two years,” said Dickerson. “Among our industry peers, Diamond Offshore’s balance sheet is the least levered, and we enjoy the highest credit ratings.”

CONFERENCE CALL

Diamond Offshore will host a conference call to discuss third quarter results on Thursday, October 18, 2012 beginning at 9:00 a.m. CDT. A live webcast of the call will be available online on the Company’s website, www.diamondoffshore.com. Those interested in participating in the question and answer session should dial 800-247-9979, or 973-321-1100 for international callers. The conference ID number is 35359805. An online replay will also be available on www.diamondoffshore.com following the call.

ABOUT DIAMOND OFFSHORE

Diamond Offshore provides contract drilling services to the energy industry and is a leader in deepwater drilling. Diamond Offshore’s fleet of offshore drilling rigs consists of 30 semisubmersibles, seven jack-ups and one drillship, in addition to four ultra-deepwater drillships and two deepwater semisubmersibles currently under construction. For additional information and access to SEC filings, please visit the Company’s website at www.diamondoffshore.com. Diamond Offshore is a 50.4% owned subsidiary of Loews Corporation (NYSE: L).

FORWARD-LOOKING STATEMENTS

Maximum contract revenue as stated above assumes 100% rig utilization. Generally, rig utilization rates approach 92-98% during contracted periods; however, utilization rates can be adversely impacted by additional downtime due to unscheduled repairs, maintenance and weather. Additional information on Diamond Offshore Drilling, Inc. (“the Company”) and access to the Company’s SEC filings is available on the Internet at www.diamondoffshore.com.

Statements contained in this press release that are not historical facts are “forward-looking statements” within the meaning of the federal securities laws. Such statements include, but are not limited to, statements concerning future revenues and backlog, future performance under contract awards and extensions, future operations and dayrates, future financial condition, market outlook and future market conditions, future rig construction and future contracting opportunities. Forward-looking statements are inherently uncertain and subject to a variety of assumptions, risks and uncertainties that could cause actual results to differ materially from those anticipated or expected by management of the Company. A discussion of the important risk factors and other considerations that could materially impact these matters as well as the Company’s overall business and financial performance can be found in the Company’s reports filed with the Securities and Exchange Commission and readers of this press release are urged to review those reports carefully when considering these forward-looking statements. Copies of these reports are available through the Company’s website at www.diamondoffshore.com. These factors include, among others, general economic and business conditions, contract cancellations, customer bankruptcy, operating risks, casualty losses, industry fleet capacity, changes in foreign and domestic oil and gas exploration and production activity, competition, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, customer preferences and various other matters, many of which are beyond the Company’s control. Given these risk factors, investors and analysts should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.
     

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)
 
Three Months Ended

 

Nine Months Ended
September 30,

 

September 30,
2012   2011 2012   2011
 
Revenues:
Contract drilling $ 714,027 $ 861,511 $ 2,195,443 $ 2,520,030
Revenues related to reimbursable expenses 15,114   16,666   40,528   54,032  
Total revenues 729,141   878,177   2,235,971   2,574,062  
 
Operating expenses:
Contract drilling, excluding depreciation 357,281 391,369 1,159,635 1,141,739
Reimbursable expenses 14,563 16,206 39,351 52,443
Depreciation 99,207 101,175 300,069 303,523
General and administrative 13,476 14,879 49,803 48,976
Bad debt recovery -- 4,734 (1,018 ) (5,413 )
Gain on disposition of assets (208 ) (463 ) (79,285 ) (4,344 )
Total operating expenses 484,319   527,900   1,468,555   1,536,924  
 
Operating income 244,822 350,277 767,416 1,037,138
 
Other income (expense):
Interest income 773 2,024 4,052 3,565
Interest expense (8,720 ) (15,874 ) (36,780 ) (60,144 )
Foreign currency transaction gain (loss) (1,860 ) (1,442 ) (881 ) (4,603 )
Other, net (168 ) (136 ) (767 ) (232 )
 
Income before income tax expense 234,847 334,849 733,040 975,724
 
Income tax expense (56,661 ) (77,995 ) (168,224 ) (201,672 )
 
Net Income $ 178,186   $ 256,854   $ 564,816   $ 774,052  
 
Income per share:
Basic $ 1.28   $ 1.85   $ 4.06   $ 5.57  
Diluted $ 1.28   $ 1.85   $ 4.06   $ 5.57  
 
Weighted average shares outstanding:
Shares of common stock 139,030 139,027 139,029 139,027
Dilutive potential shares of common stock 23   14   17   21  
Total weighted average shares outstanding 139,053   139,041   139,046   139,048  
 

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

(Unaudited)

(In thousands)
 

Three Months Ended
Sep 30,     Jun 30,     Sep 30,
2012     2012     2011
   
REVENUES
Floaters:
Ultra-Deepwater $ 195,574 $ 233,071 $ 220,415
Deepwater 163,816 142,565 217,379
Mid-water 319,491       310,462       377,127  
Total Floaters 678,881 686,098 814,921
Jack-ups 35,146 40,163 46,540
Other --       --       50  
Total Contract Drilling Revenue $ 714,027     $ 726,261     $ 861,511  
 
Revenues Related to Reimbursable Expenses

$

15,114
   

$

11,927
   

$

16,666
 
 
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater $ 132,705 $ 137,087 $ 119,868
Deepwater 58,029 68,653 57,662
Mid-water 135,935       160,642       163,957  
Total Floaters 326,669 366,382 341,487
Jack-ups 24,245 29,240 43,281
Other 6,367       9,630       6,601  
Total Contract Drilling Expense $ 357,281     $ 405,252     $ 391,369  
 
Reimbursable Expenses $ 14,563     $ 11,637     $ 16,206  
 
OPERATING INCOME
Floaters:
Ultra-Deepwater $ 62,869 $ 95,984 $ 100,547
Deepwater 105,787 73,912 159,717
Mid-water 183,556       149,820       213,170  
Total Floaters 352,212 319,716 473,434
Jack-ups 10,901 10,923 3,259
Other (6,367 ) (9,630 ) (6,551 )
Reimbursable expenses, net 551 290 460
Depreciation (99,207 ) (99,469 ) (101,175 )
General and administrative expense (13,476 ) (18,741 ) (14,879 )
Bad debt recovery (expense) -- 400 (4,734 )
Gain on disposition of assets 208       53,695       463  
Total Operating Income $ 244,822     $ 257,184     $ 350,277  
 
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
     
September 30, December 31,
2012 2011
(unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $ 316,599 $ 333,765
 
Marketable securities 1,175,572 902,414
 
Accounts receivable, net of allowance for bad debts 463,219 563,934
 
Prepaid expenses and other current assets 143,441 192,570
   
Total current assets 2,098,831 1,992,683
 
Drilling and other property and equipment, net of
accumulated depreciation 4,835,715 4,667,469
 
Other assets 245,204 304,005
Total assets $ 7,179,750 $ 6,964,157
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities $ 432,698 $ 427,291
 
Long-term debt 1,496,004 1,495,823
 
Deferred tax liability 534,767 536,815
 
Other liabilities 174,851 171,165
   
Stockholders’ equity 4,541,430 4,333,063
   
Total liabilities and stockholders’ equity $ 7,179,750 $ 6,964,157
         

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATES AND UTILIZATION

(Dayrate in thousands)
 
Third Quarter Second Quarter Third Quarter
    2012     2012     2011
    Dayrate     Utilization     Dayrate     Utilization     Dayrate     Utilization
Ultra-Deepwater Floaters $354     75% $354     89% $336     88%
Deepwater Floaters $373 95% $372 83% $465 99%
Mid-Water Floaters $258 71% $262 66% $268 70%
Jack-Ups $98 56% $94 49% $84 44%

Copyright Business Wire 2010

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