Ocean Rig (ORIG) jumped 28% on Friday morning to $2.32 per share on a better-than-expected first quarter earnings report, although analysts wonder if some of the improvement may be attributed to fees from oil and gas explorers cancelling use of its equipment before their contracts end.

"We temper our enthusiasm based on whether early termination payments are the source," Seaport Global Securities analyst Mark Brown wrote in a note.

The Nicosia, Cyprus-based offshore drilling services provider reported net income of $288 million, or $2.07 per share, after the markets closed yesterday. After non-cash gains associated with the purchase of some of its notes, the company booked net earnings of $163 million, or $1.17 per share, 44% higher than analysts' estimates of 81 cents per share.

Sales increased increased by $105.9 million to $508 million for the three months versus $402.1 million in the same period last year, far exceeding analysts' expectations of $259 million for the quarter.

Simmons & Co. International analyst Ian Macpherson said half of hte sales improvement appears to be attributable to more working days than expected for two of its rigs, the Raude and Eiriksson, but he can't reconcile the other half of the variance. "[We] wonder whether any contract termination settlements might have played a part," he said.

Operating expenses on its drilling units went down to $145.6 million from $152.9 million and depreciation and amortization slid to $85.9 million versus $88.4 million in the same quarter last year. General and administrative expenses also decreased to $18.8 million in the first quarter from $28 million in the same period last year.

Chairman and CEO George Economou said in the statement that despite the current market conditions and its recent contract terminations, management is pleased to report another solid quarter with a fleet utilization of 96.3% and further reductions in corporate and operating expenses. "Our performance is a testament to the superior operating results associated with modern assets and the collective efforts of our operating team," he said.

The company said its Leiv Eiriksson drilling rig is at a yard in Norway before starting its contract with Lundin Norway AS in the third quarter while the Eirik Raude is en route to its stacking location and is available for employment.