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Diamond Offshore Reports Third Quarter 2014 Results

Contracts Awarded to Two New Drillships
Contract Extensions Awarded on Three Semisubmersibles

HOUSTON, Oct. 23, 2014 /PRNewswire/ -- Diamond Offshore Drilling, Inc. (NYSE: DO) today reported third quarter 2014 net income of $53 million, or $0.38 per share, compared to net income of $95 million, or $0.68 per share, in the third quarter of 2013.  Revenues in the third quarter of 2014 were $738 million, compared to revenues of $706 million in the third quarter of 2013.

The Company today announced plans to retire and scrap six of its mid-water semisubmersible rigs, resulting in a non-cash impairment charge in the third quarter of $109 million before tax, or $0.84 per share after tax.  The retired units include the Ocean Epoch, Ocean New Era and Ocean Whittington, which are currently cold-stacked, and the Ocean Concord and Ocean Yatzy, which are currently idle in Brazil.  The sixth unit, the Ocean Winner, will be retired and scrapped upon completion of its current contract term in Brazil.

Results for the quarter include favorable settlements of tax audits in Brazil and Malaysia and expiration of the statute of limitations in various jurisdictions for which tax expense had previously been recognized.  As a result of these items, tax expense was reduced by $0.23 per share, and a related decrease in interest expense benefited results by $0.03 per share.

The Company also announced today that a subsidiary of the Company has entered into term drilling contracts with Hess Corporation for employment of the Company's new-build drillships Ocean BlackRhino and Ocean BlackLion.  The drilling contracts are contingent upon Hess obtaining full project sanction from partners.  Once effective, the commitments for the two units are expected to generate combined total revenue to the Company of approximately $1.02 billion and represent seven years of contract drilling backlog. The Ocean BlackLion is anticipated to commence operations in the U.S. Gulf of Mexico in the fourth quarter of 2015 on a four-year term, and the Ocean BlackRhino is expected to begin working in the U.S. Gulf of Mexico in the fourth quarter of 2016 on a three-year term.

"We are pleased to have the opportunity to place our newest rigs under contract with Hess, continuing a successful long-term relationship," said Marc Edwards, President and Chief Executive Officer.  "With this announcement, all of our new-build units—four drillships and a harsh environment semisubmersible—are contracted into 2019 or beyond."

"By operating all of our new-build drillships in the U.S. Gulf, we are positioned to enjoy meaningfully lower operating costs than in other ultra-deepwater markets," added Mr. Edwards.

The Company also announced that it has received from Petrobras contract extensions on three ultra-deepwater semisubmersibles expected to generate maximum total revenue of $1.4 billion and represent nine years of contract drilling backlog.  The new contract terms and dayrates are as follows:

  • Ocean Baroness:  Three-year term extension at $310,000 per day.
  • Ocean Courage:  Three-year term extension at $455,000 per day, plus a $112,000 uplift in day rate for a period of 390 days, related to the early termination of the Ocean Concord.
  • Ocean Valor:  Three-year term extension at $455,000 per day.

"Today we have announced term contracts and extensions that add more than $2.4 billion to our existing revenue backlog, bringing the total to $8.2 billion," said Mr. Edwards. "In addition, we recently increased our revolving credit facility to $1.5 billion, which will provide added flexibility to our already strong balance sheet."

CONFERENCE CALL

A conference call to discuss Diamond Offshore's earnings results has been scheduled for 8:00 a.m. CDT today.   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 20299415.  An online replay will also be available on www.diamondoffshore.com following the call.

ABOUT DIAMOND OFFSHORE

Diamond Offshore is a leader in offshore drilling, providing contract drilling services to the energy industry around the globe with a total fleet of 38 offshore drilling rigs, including five rigs under construction.  Diamond Offshore's fleet consists of 27 semisubmersibles, two of which are under construction, five dynamically positioned drillships, three of which are under construction, and six jack-ups. Additional information about the Company and access to the Company's SEC filings are available at www.diamondoffshore.com. Diamond Offshore is owned 51% by Loews Corporation (NYSE: L).

FORWARD-LOOKING STATEMENTS

Contract revenue as stated above assumes 100% rig utilization.  Rig utilization rates vary depending on a variety of circumstances, many of which are beyond the Company's control.  Rig utilization rates generally approach 92-98% during contracted periods; however, utilization rates can be adversely impacted by additional downtime due to various operating factors, including, but not limited to, weather conditions and unscheduled repairs and maintenance.  Additional information on 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 or made during the above conference call 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 drilling rig deliveries, operations and timing; contract effectiveness and effective dates; plans regarding retirement and scrapping of drilling rigs; expectations of future backlog, revenue, operating costs and performance; future liquidity, financial condition, market conditions and strategic opportunities; revenue expected to result from backlog; and other statements that are not of historical fact.  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 risk factors include, among others, risks associated with general economic and business conditions, contract cancellations, customer or vendor bankruptcy, operations, litigation, 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 and sanction initiatives and compliance with governmental regulations, customer preferences, obtaining necessary partner and third party approvals, timing of construction of new builds, collection of receivables, 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,




2014


2013


2014


2013








Revenues:











           Contract drilling

$

727,888

$

690,741

$

2,062,750

$

2,135,612



          Revenues related to reimbursable expenses


9,794


15,424


76,600


58,312



                     Total revenues


737,682


706,165


2,139,350


2,193,924














Operating expenses:











           Contract drilling, excluding depreciation


399,802


419,488


1,164,968


1,163,618



           Reimbursable expenses


9,437


14,904


75,393


56,998



           Depreciation


108,854


97,143


324,771


291,107



           General and administrative


18,604


15,240


61,909


48,490



           Bad debt expense


--


22,563


--


22,563



           Loss (gain) on disposition of assets


1,107


(525)


(7,612)


(2,789)



           Impairment of assets


109,462


--


109,462


--



                     Total operating expenses


647,266


568,813


1,728,891


1,579,987














Operating income


90,416


137,352


410,459


613,937














Other income (expense):











           Interest income


86


136


644


1,024



           Interest expense


(9,378)


(1,693)


(46,056)


(17,713)



Foreign currency transaction gain (loss)


425


(4,556)


(3,724)


(3,949)



           Other, net


90


326


598


746














Income before income tax expense


81,639


131,565


361,921


594,045














Income tax expense


(28,994)


(36,817)


(73,753)

 


(137,974)

 














Net Income                                                                                    

$

52,645

$

94,748

$

288,168

$

456,071














Income per share

$

0.38

$

0.68

$

2.09

$

3.28














Weighted average shares outstanding:










 Shares of common stock


137,146


139,035


137,582


139,034


 Dilutive potential shares of common stock


1


30


3


38


       Total weighted average shares outstanding


137,147


139,065


137,585


139,072

 

 

 


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES


RESULTS OF OPERATIONS


(Unaudited)


(In thousands)








Three Months Ended




Sep 30,


Jun 30,


Sep 30,



2014


2014


2013










REVENUES








 Floaters:








   Ultra-Deepwater

$

313,124

$

182,656

$

195,215


    Deepwater


111,372


120,539


147,333


    Mid-water


258,028


300,902


297,368


      Total Floaters


682,524


604,097


639,916


  Jack-ups


45,364


45,457


50,825


Total Contract Drilling Revenue

$

727,888

$

649,554

$

690,741










Revenues Related to Reimbursable Expenses

 

$

 

9,794

 

$

 

42,690

 

$

 

15,424










CONTRACT DRILLING EXPENSE








 Floaters:








   Ultra-Deepwater

$

157,655

$

122,327

$

139,689


    Deepwater


72,367


81,641


74,609


    Mid-water


132,340


148,931


165,518


      Total Floaters


362,362


352,899


379,816


  Jack-ups


28,056


29,851


28,685


  Other


9,384


12,626


10,987


Total Contract Drilling Expense

$

399,802

$

395,376

$

419,488










Reimbursable Expenses

$

9,437

$

42,290

$

14,904










OPERATING INCOME








 Floaters:








   Ultra-Deepwater

$

155,469

$

60,329

$

55,526


    Deepwater


39,005


38,898


72,724


    Mid-water


125,688


151,971


131,850


      Total Floaters


320,162


251,198


260,100


  Jack-ups


17,308


15,606


22,140


  Other


(9,384)


(12,626)


(10,987)


  Reimbursable expenses, net


357


400


520


  Depreciation


(108,854)


(108,906)


(97,143)


  General and administrative expense


(18,604)


(20,478)


(15,240)


  Bad debt expense


--


--


(22,563)


  (Loss) gain on disposition of assets


(1,107)


8,572


525


  Impairment of assets


(109,462)


--


--


          Total Operating Income

$

90,416

$

133,766

$

137,352













 

 

 


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)












September 30,

December 31,





2014


2013






ASSETS










Current assets:






Cash and cash equivalents

$

468,823

$

347,011








Marketable securities


600,143


1,750,053








Accounts receivable, net of allowance for bad debts


517,389


469,355








Prepaid expenses and other current assets


185,350


143,997








Assets held for sale


--


7,694





1,771,705


2,718,110






Drilling and other property and equipment, net of





     accumulated depreciation


6,071,935


5,467,227







Other assets


192,872


206,097



Total assets

$

8,036,512

$

8,391,434








LIABILITIES AND STOCKHOLDERS' EQUITY










Current portion of long-term debt

$

249,946

$

249,954






Other current liabilities


621,801


495,628






Long-term debt


1,994,466


2,244,189






Deferred tax liability


513,881


525,541






Other liabilities


183,504


238,864








Stockholders' equity


4,472,914


4,637,258










Total liabilities and stockholders' equity

$

8,036,512

$

8,391,434

















 

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY

(Dayrate in thousands)










Third Quarter

2014

Second Quarter

2014

Third Quarter

2013


Average

Dayrate (1)

Utilization (2)

Operational Efficiency

(3)

Average

Dayrate (1)

Utilization (2)

Operational Efficiency

(3)

Average

Dayrate (1)

Utilization (2)

Operational Efficiency

(3)































Ultra-Deepwater Floaters

$442

77%

92.2%

$403

51%

96.0%

$284

93%

93.0%











Deepwater Floaters

$346

57%

95.5%

$418

51%

99.3%

$380

84%

97.9%











Mid-Water floaters

$263

59%

94.1%

$266

68%

97.6%

$258

68%

97.0%











Jack-ups

$99

83%

99.3%

$97

74%

99.4%

$93

84%

98.5%











Fleet Total



94.7%



97.8%



96.4%


(1) Average dayrate is defined as contract drilling revenue for all of the specified rigs in our fleet (excluding revenues for mobilization, demobilization and contract preparation) per revenue earning day. A revenue earning day is defined as a 24-hour period during which a rig earns a dayrate after commencement of operations and excludes mobilization, demobilization and contract preparation days.


(2) Utilization is calculated as the ratio of total revenue-earning days divided by the total calendar days in the period for all specified rigs in our fleet (including cold-stacked rigs, but excluding rigs under construction). As of September 30, 2014, four of our mid-water semisubmersible drilling rigs (Ocean New Era, Ocean Epoch, Ocean Whittington, and Ocean Vanguard) were cold-stacked.


(3) Operational efficiency is calculated as the ratio of total revenue-earning days divided by the sum of total revenue-earning days plus the number of days (or portions thereof) associated with unanticipated equipment downtime.


 

Contact:          
Darren Daugherty
Director, Investor Relations
(281) 492-5370

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SOURCE Diamond Offshore Drilling, Inc.