Press Release

HOUSTON--(BUSINESS WIRE)--Jul. 19, 2012-- Diamond Offshore Drilling, Inc.(NYSE:DO) today reported net income for the second quarter of 2012 of $201.5 million, or $1.45 per share on a diluted basis, compared with net income of $266.6 million, or $1.92 per share on a diluted basis, in the same period a year earlier. Revenues in the second quarter of 2012 were $738.2 million, compared with revenues of $889.5 million for the second quarter of 2011.

Results for the quarter included an after-tax gain of approximately $50.5 million, or $0.36 per share, related to the sale of five jack-up rigs. These transactions included the sale of the Ocean Sovereign for $38.5 million cash, in addition to the previously announced sales of the Ocean Heritage, Ocean Drake, Ocean Crusader and Ocean Champion. The reduction in the Company’s overall effective tax rate for the quarter, compared to the previous quarter, resulted primarily from the low effective tax rate associated with these sales transactions.

Since the first quarter of 2012, the Company put in place 14 new agreements that are expected to generate maximum total revenue of approximately $1.1 billion and 10 rig-years of contract drilling backlog. Significant among these awarded contracts are the following:

• The Ocean Onyx was awarded a one-year contract with Apache Deepwater LLC, a subsidiary of Apache Corporation, at a rate of $490,000 per day. The rig will work in the U.S. Gulf of Mexico upon its completion and delivery from the shipyard in 3Q of 2013.
• The Ocean Vanguard was extended with Statoil by 20 months to continue operating in the Norwegian sector of the North Sea into March of 2015. The new rate will be $450,000 per day, up from the previous rate of $352,000 per day.
• The Ocean Nomad was awarded a two-year contract with Dana Petroleum to work in the U.K. North Sea until June of 2015. The rate will be $330,000 per day.
• The Ocean Guardian was extended with Shell for one year at a rate of $350,000 per day to continue working in the U.K. North Sea until July of 2015. The current rate is $263,000 per day.

“Our contract announcements reflect the continued strength in deep and mid-water markets,” said Larry Dickerson, President and Chief Executive Officer of Diamond Offshore. “In particular, we are pleased with the award for the Ocean Onyx, our deepwater semisubmersible rig currently under construction. The Company is currently evaluating another potential project that would deliver a rig with enhanced capabilities, similar to the Ocean Onyx.”

“Over the past several quarters, our results have also benefitted from our ongoing efforts to control costs and reduce unanticipated rig downtime,” said Dickerson. “During the second quarter, we continued to execute on these initiatives, which contributed to our strong operating results.”

CONFERENCE CALL

Diamond Offshore will host a conference call to discuss first quarter results on Thursday, July 19, 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 93863487. 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 31 semisubmersibles, seven jack-ups, and one drillship, in addition to four ultra-deepwater drillships and one deepwater semisubmersible 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, delivery of the Ocean Onyx from the shipyard, 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								Six Months Ended
			June 30,								June 30,
			2012				2011				2012				2011
Revenues:
Contract drilling		$	726,261			$	869,646			$	1,481,416			$	1,658,519
Revenues related to reimbursable expenses			11,927				19,850				25,414				37,366
Total revenues			738,188				889,496				1,506,830				1,695,885
Operating expenses:
Contract drilling, excluding depreciation			405,252				388,006				802,354				750,370
Reimbursable expenses			11,637				19,287				24,788				36,237
Depreciation			99,469				101,175				200,862				202,348
General and administrative			18,741				16,372				36,327				34,097
Bad debt recovery			(400	)			(1,700	)			(1,018	)			(10,147	)
Gain on disposition of assets			(53,695	)			(1,240	)			(79,077	)			(3,881	)
Total operating expenses			481,004				521,900				984,236				1,009,024
Operating income			257,184				367,596				522,594				686,861
Other income (expense):
Interest income			1,496				1,091				3,279				1,541
Interest expense			(12,731	)			(22,226	)			(28,060	)			(44,270	)
Foreign currency transaction gain (loss)			1,083				(1,555	)			979				(3,161	)
Other, net			(274	)			(880	)			(599	)			(96	)
Income before income tax expense			246,758				344,026				498,193				640,875
Income tax expense			(45,297	)			(77,440	)			(111,563	)			(123,677	)
Net Income		$	201,461			$	266,586			$	386,630			$	517,198
Income per share:
Basic		$	1.45			$	1.92			$	2.78			$	3.72
Diluted		$	1.45			$	1.92			$	2.78			$	3.72
Weighted average shares outstanding:
Shares of common stock			139,029				139,027				139,028				139,027
Dilutive potential shares of common stock			11				25				11				25
Total weighted average shares outstanding			139,040				139,052				139,039				139,052

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
		Three Months Ended
		Jun 30,				Mar 31,				Jun 30,
		2012				2012				2011
REVENUES
Floaters:
Ultra-Deepwater		$	233,071			$	244,589			$	233,271
Deepwater			142,565				146,003				192,791
Mid-water			310,462				318,595				383,067
Total Floaters			686,098				709,187				809,129
Jack-ups			40,163				45,968				60,512
Other			--				--				5
Total Contract Drilling Revenue		$	726,261			$	755,155			$	869,646
Revenues Related to Reimbursable Expenses		$	11,927			$	13,487			$	19,850
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater		$	137,087			$	139,961			$	132,907
Deepwater			68,653				58,594				59,658
Mid-water			160,642				162,779				149,773
Total Floaters			366,382				361,334				342,338
Jack-ups			29,240				31,443				38,552
Other			9,630				4,325				7,116
Total Contract Drilling Expense		$	405,252			$	397,102			$	388,006
Reimbursable Expenses		$	11,637			$	13,151			$	19,287
OPERATING INCOME
Floaters:
Ultra-Deepwater		$	95,984			$	104,628			$	100,364
Deepwater			73,912				87,409				133,133
Mid-water			149,820				155,816				233,294
Total Floaters			319,716				347,853				466,791
Jack-ups			10,923				14,525				21,960
Other			(9,630	)			(4,325	)			(7,111	)
Reimbursable expenses, net			290				336				563
Depreciation			(99,469	)			(101,393	)			(101,175	)
General and administrative expense			(18,741	)			(17,586	)			(16,372	)
Bad debt recovery			400				618				1,700
Gain on disposition of assets			53,695				25,382				1,240
Total Operating Income		$	257,184			$	265,410			$	367,596

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
					June 30,			December 31,
					2012			2011
					(unaudited)
ASSETS
Current assets:
Cash and cash equivalents				$	376,359		$	333,765
Marketable securities					975,947			902,414
Accounts receivable, net of allowance for bad debts					532,302			563,934
Prepaid expenses and other current assets					160,012			192,570
Total current assets					2,044,620			1,992,683
Drilling and other property and equipment, net of accumulated depreciation					4,780,747			4,667,469
Other assets					257,530			304,005
Total assets				$	7,082,897		$	6,964,157
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities				$	392,458		$	427,291
Long-term debt					1,495,943			1,495,823
Deferred tax liability					535,965			536,815
Other liabilities					176,539			171,165
Stockholders’ equity					4,481,992			4,333,063
Total liabilities and stockholders’ equity				$	7,082,897		$	6,964,157

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
AVERAGE DAYRATES AND UTILIZATION
(Dayrate in thousands)
		Second Quarter				First Quarter				Second Quarter
		2012				2012				2011
		Dayrate		Utilization		Dayrate		Utilization		Dayrate		Utilization
Ultra-Deepwater Floaters		$354		89%		$364		85%		$340		92%
Deepwater Floaters		$372		83%		$359		88%		$422		98%
Mid-Water Floaters		$262		66%		$266		65%		$265		77%
Jack-Ups		$94		49%		$87		44%		$82		60%

Source: Diamond Offshore Drilling, Inc.

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