Press Release

HOUSTON--(BUSINESS WIRE)--Feb. 5, 2013-- Diamond Offshore Drilling, Inc.(NYSE: DO) today reported net income for the fourth quarter of 2012 of $156 million, or $1.12 per share on a diluted basis, compared with net income of $188 million, or $1.36 per share on a diluted basis, in the same period a year earlier. Revenues in the fourth quarter of 2012 were $751 million, compared with revenues of $748 million in the prior-year quarter.

During the fourth quarter, the Company reclassified its four cold-stacked rigs as held for sale and recognized an after-tax impairment charge of $40.6 million, or $0.29 per share. These units are the semisubmersible rigs Ocean Epoch, Ocean New Era and Ocean Whittington and the jack-up rig Ocean Spartan.

The effective tax rate for the quarter was 15.9 percent, compared with 7.4 percent in the fourth quarter of 2011. Lower tax expense in the prior-year quarter was driven by a reduction of the Company’s liability for uncertain tax positions. The full-year 2012 effective tax rate was 21.5 percent versus the prior-year effective tax rate of 18.4 percent.

For the full-year 2012, the Company reported net income of $720 million, or $5.18 per share on a diluted basis, compared with net income of $963 million, or $6.92 per share on a diluted basis, in 2011. Revenues for the full-year 2012 were $2.987 billion, compared with $3.322 billion in 2011.

“Our results for the fourth quarter and full year reflect our continuing efforts to manage operating costs across the fleet,” said Larry Dickerson, President and Chief Executive Officer of Diamond Offshore. “While there is some cost inflation pressure in our industry, we remain focused on controlling and reducing expenses.”

The Company announced that the Ocean Patriot was awarded a three-year contract in the North Sea at a rate of $400,500 per day, which is expected to generate maximum total revenue of approximately $439 million. After completing its current contracts in Southeast Asia, the rig will undergo required North Sea enhancements at a total estimated cost of approximately $120 million. Following these upgrades and subsequent mobilization to the North Sea, the rig is expected to commence work early in the second quarter of 2014.

“The opportunity to upgrade the Ocean Patriot to work for our customer Shell in the North Sea demonstrates the ongoing strength in that market,” said Larry Dickerson. “This project is consistent with Diamond Offshore’s long-term strategy of investing in our fleet at attractive capital costs.”

Capital expenditures for the six rigs currently under construction totaled $499 million in full-year 2012, excluding capitalized interest. To complete these projects, the Company estimates that remaining capital expenditures, excluding capitalized interest, will be $1.3 billion in 2013 and $1.1 billion in 2014.

CONFERENCE CALL

Diamond Offshore will host a conference call to discuss fourth quarter results on Tuesday, February 5, 2013 beginning at 9:00 a.m. CST. 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 86787795. 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 operating costs and expenses, future operations and dayrates, future financial condition, market outlook and future market conditions, future rig construction and upgrades and expected expenditures therefor, 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										Twelve Months Ended
					December 31,										December 31,
					2012					2011					2012					2011
Revenues:
Contract drilling				$	740,623				$	734,283				$	2,936,066				$	3,254,313
Revenues related to reimbursable expenses					9,914					14,074					50,442					68,106
Total revenues					750,537					748,357					2,986,508					3,322,419
Operating expenses:
Contract drilling, excluding depreciation					377,589					406,763					1,537,224					1,548,502
Reimbursable expenses					9,427					13,609					48,778					66,052
Depreciation					92,844					95,089					392,913					398,612
General and administrative					14,837					16,334					64,640					65,310
Impairment of assets					62,437					--					62,437					--
Bad debt recovery					--					(1,300	)				(1,018	)				(6,713	)
Gain on disposition of assets					(1,559	)				(414	)				(80,844	)				(4,758	)
Total operating expenses					555,575					530,081					2,024,130					2,067,005
Operating income					194,962					218,276					962,378					1,255,414
Other income (expense):
Interest income					858					3,103					4,910					6,668
Interest expense					(9,436	)				(12,993	)				(46,216	)				(73,137	)
Foreign currency transaction gain (loss)					(1,118	)				(3,985	)				(1,999	)				(8,588	)
Other, net					(225	)				(854	)				(992	)				(1,086	)
Income before income tax expense					185,041					203,547					918,081					1,179,271
Income tax expense					(29,380	)				(15,057	)				(197,604	)				(216,729	)
Net Income				$	155,661				$	188,490				$	720,477				$	962,542
Income per share:
Basic				$	1.12				$	1.36				$	5.18				$	6.92
Diluted				$	1.12				$	1.36				$	5.18				$	6.92
Weighted average shares outstanding:
Shares of common stock					139,031					139,027					139,029					139,027
Dilutive potential shares of common stock					31					9					19					11
Total weighted average shares outstanding					139,062					139,036					139,048					139,038

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
					Three Months Ended
					Dec 31,					Sep 30,					Dec 31,
					2012					2012					2011
REVENUES
Floaters:
Ultra-Deepwater				$	229,560				$	195,574				$	189,148
Deepwater					145,310					163,816					190,615
Mid-water					326,520					319,491					312,256
Total Floaters					701,390					678,881					692,019
Jack-ups					39,233					35,146					42,264
Total Contract Drilling Revenue				$	740,623				$	714,027				$	734,283
Revenues Related to Reimbursable Expenses				$	9,914				$	15,114				$	14,074
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater				$	135,837				$	132,705				$	132,187
Deepwater					67,772					58,029					52,843
Mid-water					143,124					135,935					169,481
Total Floaters					346,733					326,669					354,511
Jack-ups					21,582					24,245					45,597
Other					9,274					6,367					6,655
Total Contract Drilling Expense				$	377,589				$	357,281				$	406,763
Reimbursable Expenses				$	9,427				$	14,563				$	13,609
OPERATING INCOME
Floaters:
Ultra-Deepwater				$	93,723				$	62,869				$	56,961
Deepwater					77,538					105,787					137,772
Mid-water					183,396					183,556					142,775
Total Floaters					354,657					352,212					337,508
Jack-ups					17,651					10,901					(3,333	)
Other					(9,274	)				(6,367	)				(6,655	)
Reimbursable expenses, net					487					551					465
Depreciation					(92,844	)				(99,207	)				(95,089	)
General and administrative expense					(14,837	)				(13,476	)				(16,334	)
Impairment of assets					(62,437	)				--					--
Bad debt recovery					--					--					1,300
Gain on disposition of assets					1,559					208					414
Total Operating Income				$	194,962				$	244,822				$	218,276

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
									December 31,
									2012				2011
ASSETS
Current assets:
		Cash and cash equivalents						$	335,432			$	333,765
		Marketable securities							1,150,158				902,414
		Accounts receivable, net of allowance for bad debts							499,660				563,934
		Prepaid expenses and other current assets							136,099				192,570
		Assets held for sale							11,594				--
				Total current assets					2,132,943				1,992,683
Drilling and other property and equipment, net of accumulated depreciation									4,864,972				4,667,469
Other assets									237,371				304,005
				Total assets				$	7,235,286			$	6,964,157
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities								$	485,546			$	427,291
Long-term debt									1,496,066				1,495,823
Deferred tax liability									490,946				536,815
Other liabilities									186,334				171,165
Stockholders’ equity									4,576,394				4,333,063
				Total liabilities and stockholders’ equity				$	7,235,286			$	6,964,157

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
AVERAGE DAYRATES AND UTILIZATION
(Dayrate in thousands)
				Fourth Quarter						Third Quarter						Fourth Quarter
				2012						2012						2011
				Dayrate			Utilization			Dayrate			Utilization			Dayrate			Utilization
Ultra-Deepwater Floaters				$348			89%			$354			75%			$356			70%
Deepwater Floaters				$372			85%			$373			95%			$422			97%
Mid-Water Floaters				$268			70%			$258			71%			$271			60%
Jack-Ups				$85			71%			$98			56%			$79			36%

Source: Diamond Offshore Drilling, Inc.

Diamond Offshore Drilling, Inc.
Darren Daugherty, 281-492-5370
Director, Investor Relations