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Diamond Offshore Announces Second Quarter 2016 Results
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- Reported net loss of $4.30 per diluted share
- Adjusted earnings of $0.16 per diluted share, excluding special items

HOUSTON, Aug. 1, 2016 /PRNewswire/ -- Diamond Offshore Drilling, Inc. (NYSE: DO) today reported results for the second quarter of 2016.



Three Months Ended



Thousands of dollars, except per share data               


June 30,
2016


March 31,
2016


Change



Total revenues


$   388,747


$    470,543


(17)%








Operating (loss) income


(626,669)


111,569


(662)%








Adjusted operating income


51,476


111,569


(54)%








Net (loss) income


(589,937)


87,425


(775)%








Adjusted net income


22,295


87,425


(74)%








(Loss) earnings per diluted share


($4.30)


$0.64


(772)%








Adjusted earnings per diluted share


$0.16


$0.64


(75)%








"Despite facing both market and operational headwinds during the quarter, Diamond was able to record adjusted earnings per share of $0.16," said Marc Edwards, President and Chief Executive Officer.

Results for the second quarter were significantly impacted by impairment charges and related taxes of $612 million, or $4.46 per diluted share, primarily relating to the carrying value of eight semisubmersible rigs and associated inventory.

Operational efficiency of the Company's fleet was 92.7% in the second quarter, compared to 98.2% in the first quarter of 2016. The decline in operational efficiency was primarily driven by issues experienced within the ultra-deepwater floater category, specifically as it relates to four unplanned retrievals of blowout preventers.

Utilization in the deep-water segment increased by 25% in the second quarter of 2016, compared to the first quarter of 2016. The increase was driven by the Ocean Apex beginning its 18-month contract with Woodside in Australia at a rate of $285,000 per day. The rig was recently awarded a three-month extension at $205,000 per day, which will keep the rig working until February 2018.

During the quarter, the Company elected to cold stack the Ocean Endeavor and Ocean Scepter. The Company's decision was guided by its desire to minimize costs associated with the rigs, while ensuring the rigs are preserved in such a manner as to enable a quick reactivation when the market recovers. Additionally, the Company intends to scrap the Ocean Quest and Ocean Star.

As of June 30, 2016, the Company's total contracted backlog was $4.4 billion, which represents 28 rig years of work. Approximately 86% of the Company's available ultra-deepwater rig days for the remainder of 2016 are contracted with top tier customers.

Edwards also commented on the recently announced Helical Buoyancy™ riser joint development agreement with Trelleborg, stating, "This is another example of Diamond Offshore differentiating itself in an oversupplied market. As with our Pressure Control by the Hour™ service model, Diamond Offshore is providing the industry with thought leadership to drive efficiencies and lower the cost of operating offshore."

Reflecting on the market, Edwards went on to say, "Although the market continues to be challenged, our focus is on striking a balance between controlling costs and laying the foundation to ensure Diamond Offshore is well positioned for the recovery."

CONFERENCE CALL

A conference call to discuss Diamond Offshore's earnings results has been scheduled for 7:30 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 47948706. 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. Additional information and access to the Company's SEC filings are available at www.diamondoffshore.com. Diamond Offshore is owned 53% by Loews Corporation (NYSE: L).

FORWARD-LOOKING STATEMENTS

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.  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 worldwide demand for drilling services, level of activity in the oil and gas industry, renewing or replacing expired or terminated contracts, contract cancellations and terminations, maintenance and realization of backlog, competition and industry fleet capacity, impairments and retirements, operating risks, changes in tax laws and rates, regulatory initiatives and compliance with governmental regulations, construction of new builds, casualty losses, and various other factors, 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,



2016


2015


2016


2015










Revenues:









           Contract drilling

$

357,409

$

617,442

$

800,932

$

1,217,019

           Revenues related to reimbursable expenses


31,338


16,590


58,358


37,069

                     Total revenues


388,747


634,032


859,290


1,254,088










Operating expenses:









           Contract drilling, excluding depreciation


198,336


342,869


411,177


693,527

           Reimbursable expenses


16,527


16,336


43,318


36,428

           Depreciation


105,016


123,329


209,256


260,628

           General and administrative


18,139


16,548


33,537


34,000

           Impairment of assets


678,145


--


678,145


358,528

           Restructuring and separation costs


--


993


--


7,161

           Gain on disposition of assets


(747)


(164)


(1,043)


(775)

                     Total operating expenses


1,015,416


499,911


1,374,390


1,389,497










Operating (loss) income


(626,669)


134,121


(515,100)


(135,409)










Other income (expense):









           Interest income


269


584


442


1,167

           Interest expense


(24,156)


(25,468)


(49,672)


(49,450)

           Foreign currency transaction (loss) gain


(3,513)


(3,473)


(7,121)


2,117

           Other, net


(12,046)


264


(11,468)


485










(Loss) income before income tax benefit (expense)


(666,115)


106,028


(582,919)


(181,090)










Income tax benefit (expense)


76,178


(15,642)


80,407


15,767

 

Net (loss) income

 

$

(589,937)

 

$

90,386

 

$

(502,512)

 

$

(165,323)










(Loss) income per share

$

(4.30)

$

0.66

$

(3.66)

$

(1.21)










Weighted-average shares outstanding:









           Shares of common stock


137,170


137,159


137,166


137,155

           Dilutive potential shares of common stock


--


42


--


--

                Total weighted average shares outstanding


137,170


137,201


137,166


137,155










 

 


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

(Unaudited)

 (In thousands)




Three Months Ended



June 30,


March 31,


June 30,



2016


2016


2015








REVENUES







 Floaters:







   Ultra-Deepwater

$

214,102

$

325,961

$

315,670

    Deepwater


67,191


59,117


181,104

    Mid-water


56,694


47,672


96,926

      Total Floaters


337,987


432,750


593,700

  Jack-ups


19,422


10,773


23,742

Total Contract Drilling Revenue

$

357,409

$

443,523

$

617,442








Revenues Related to Reimbursable Expenses

$

31,338

$

27,020

$

16,590








CONTRACT DRILLING EXPENSE







 Floaters:







   Ultra-Deepwater

$

127,185

$

123,736

$

161,485

    Deepwater


34,776


47,509


86,464

    Mid-water


25,862


23,884


66,735

      Total Floaters


187,823


195,129


314,684

  Jack-ups


6,876


6,055


20,873

  Other


3,637


11,657


7,312

Total Contract Drilling Expense

$

198,336

$

212,841

$

342,869








Reimbursable Expenses

$

16,527

$

26,791

$

16,336








OPERATING (LOSS) INCOME







 Floaters:







   Ultra-Deepwater

$

86,917

$

202,225

$

154,185

    Deepwater


32,415


11,608


94,640

    Mid-water


30,832


23,788


30,191

      Total Floaters


150,164


237,621


279,016

  Jack-ups


12,546


4,718


2,869

  Other


(3,637)


(11,657)


(7,312)

  Reimbursable expenses, net


14,811


229


254

  Depreciation


(105,016)


(104,240)


(123,329)

  General and administrative expense


(18,139)


(15,398)


(16,548)

  Impairment of assets


(678,145)


--


--

  Restructuring and separation costs


--


--


(993)

  Gain on disposition of assets


747


296


164

          Total Operating (Loss) Income

$

(626,669)

$

111,569

$

134,121

 

 


DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)






June 30,


December 31,





2016


2015






ASSETS










Current assets:






Cash and cash equivalents

$

103,279

$

119,028








Marketable securities


57


11,518








Accounts receivable, net of allowance for bad debts


324,588


405,370








Prepaid expenses and other current assets


112,293


119,479








Assets held for sale


6,200


14,200









Total current assets


546,417


669,595






Drilling and other property and equipment, net of





     accumulated depreciation


5,848,172


6,378,814







Other assets


110,689


101,485



Total assets

$

6,505,278

$

7,149,894








LIABILITIES AND STOCKHOLDERS' EQUITY










Short-term borrowings

$

327,300

$

286,589

 

Other current liabilities


 

300,688


 

339,134






Long-term debt


1,980,324


1,979,778






Deferred tax liability


114,384


276,529






Other liabilities


164,505


155,094








Stockholders' equity


3,618,077


4,112,770










Total liabilities and stockholders' equity

$

6,505,278

$

7,149,894






 

 

 

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY

(Dayrate in thousands)



Second Quarter
2016

First Quarter
2016

Second Quarter
2015


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

$452

47%

86.7%

$533

61%

98.4%

$483

63%

90.9%











Deepwater Floaters

$301

35%

100%

$335

28%

97.1%

$451

63%

99.3%











Mid-Water floaters

$313

30%

99.4%

$263

25%

97.7%

$278

32%

99.7%











Jack-ups

$335

13%

100%

$118

18%

100%

$83

53%

98.6%











Fleet Total



92.7%



98.2%



95.9%



(1)

Average dayrate is defined as contract drilling revenue for all of the specified rigs in our fleet 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 June 30, 2016, our cold-stacked rigs included four ultra-deepwater semisubmersibles, four deepwater semisubmersibles, four mid-water semisubmersibles and five jack-up rigs. 



(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.

 

 

 

Non-GAAP Financial Measures (Unaudited)


To supplement the Company's unaudited condensed consolidated financial statements presented on a GAAP basis, this press release provides investors with adjusted operating income, adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures.  Management believes that these measures provide meaningful information about the Company's performance by excluding certain charges that may not be indicative of the Company's ongoing operating results.  This allows investors and others to better compare the company's financial results across previous and subsequent accounting periods and to those of peer companies and to better understand the long-term performance of the Company.  Non-GAAP financial measures should be considered to be a supplement to, and not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.



Three Months Ended
June 30, 2016

Reconciliation of As Reported Operating (Loss) Income to Adjusted Operating Income:
(In thousands)




As reported operating loss

$          (626,669)



    Impairments and other charges:


        Impairment of rigs and associated inventory (1)

678,145



Adjusted operating income

$             51,476



Reconciliation of As Reported Net Loss to Adjusted Net Income:
(In thousands)




As reported net loss

$          (589,937)



    Impairments and other charges:


        Impairment of rigs and associated inventory (1)

678,145



    Tax effect of impairments and other charges:


        Impairment of rigs and associated inventory (2)

(143,165)

        Discrete tax items (3)

77,252



Adjusted net income

$             22,295



Reconciliation of As Reported Loss per Diluted Share to Adjusted Earnings per Diluted Share:




As reported loss per diluted share

$               (4.30)

    Impairments and other charges:


        Impairment of rigs and associated inventory (1)

4.94



    Tax effect of impairments and other charges:


        Impairment of rigs and associated inventory (2)

(1.04)

        Other discrete tax items (3)

0.56



Adjusted earnings per diluted share

$                 0.16

______________________________

(1)

Represents the aggregate amount of impairment losses recognized during the second quarter of 2016 related to eight of our drilling rigs and associated inventory. 



(2)

Represents the income tax effects of the aggregate impairment loss recognized in the second quarter of 2016.



(3)

Represents the aggregate of certain discrete income tax adjustments recognized during the second quarter of 2016, primarily related to valuation allowances for current and prior year tax assets associated with foreign tax credits, which we no longer expect to be able to utilize to offset income taxes in the U.S. tax jurisdiction. 

 

Contact:           
Samir Ali
Sr. Director, Investor Relations & Corporate Development
(281) 647-4035

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