Press Release

HOUSTON--(BUSINESS WIRE)--Oct. 18, 2012-- Diamond Offshore Drilling, Inc.(NYSE: DO) today reported net income for the third quarter of 2012 of $178 million, or $1.28 per share on a diluted basis, compared with net income of $257 million, or $1.85 per share on a diluted basis, in the same period a year earlier. Revenues in the third quarter of 2012 were $729 million, compared with revenues of $878 million in the third quarter of 2011.

Since the start of the third quarter of 2012, the Company entered into 13 new agreements that are expected to generate maximum total revenue of approximately $1.7 billion and 12.1 rig-years of contract drilling backlog. Significant among these awarded contracts are the following:

• The Ocean Endeavor was awarded an 18-month contract at a dayrate of $505,000, plus a potential 6.6% performance bonus. The dayrate on the current contract is $285,000. The customer name and location of rig operation have not yet been announced.
• The Ocean Lexington was awarded a 477-day job in Trinidad at a rate of $300,000 per day versus its current rate of $277,000 per day. The rig will be mobilized to Trinidad upon completion of its current contracted term in Brazil.
• The Ocean Valiant received a two-well contract extension for work offshore Equatorial Guinea. The new rate will be $515,000 per day versus the current contract rate of $375,000 per day.
• The Ocean America was awarded an 18-month contract for work offshore Australia at a dayrate of $475,000. The rig is currently contracted at a rate of $405,000 per day.

“We posted excellent operating results for the quarter and announced several new contracts at strong dayrates across all ranges of water depths,” said Larry Dickerson, President and Chief Executive Officer of Diamond Offshore. “Our results for the quarter benefited from lower than anticipated operating expense, primarily owing to our continued emphasis on controlling costs.”

“During the quarter, we entered into a $750 million revolving credit facility, which will provide additional flexibility to our already strong balance sheet, as we complete construction of six new rigs over the next two years,” said Dickerson. “Among our industry peers, Diamond Offshore’s balance sheet is the least levered, and we enjoy the highest credit ratings.”

CONFERENCE CALL

Diamond Offshore will host a conference call to discuss third quarter results on Thursday, October 18, 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 35359805. 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 operations and dayrates, future financial condition, 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									Nine Months Ended
			September 30,									September 30,
			2012				2011					2012				2011
Revenues:
Contract drilling		$	714,027			$	861,511				$	2,195,443			$	2,520,030
Revenues related to reimbursable expenses			15,114				16,666					40,528				54,032
Total revenues			729,141				878,177					2,235,971				2,574,062
Operating expenses:
Contract drilling, excluding depreciation			357,281				391,369					1,159,635				1,141,739
Reimbursable expenses			14,563				16,206					39,351				52,443
Depreciation			99,207				101,175					300,069				303,523
General and administrative			13,476				14,879					49,803				48,976
Bad debt recovery			--				4,734					(1,018	)			(5,413	)
Gain on disposition of assets			(208	)			(463	)				(79,285	)			(4,344	)
Total operating expenses			484,319				527,900					1,468,555				1,536,924
Operating income			244,822				350,277					767,416				1,037,138
Other income (expense):
Interest income			773				2,024					4,052				3,565
Interest expense			(8,720	)			(15,874	)				(36,780	)			(60,144	)
Foreign currency transaction gain (loss)			(1,860	)			(1,442	)				(881	)			(4,603	)
Other, net			(168	)			(136	)				(767	)			(232	)
Income before income tax expense			234,847				334,849					733,040				975,724
Income tax expense			(56,661	)			(77,995	)				(168,224	)			(201,672	)
Net Income		$	178,186			$	256,854				$	564,816			$	774,052
Income per share:
Basic		$	1.28			$	1.85				$	4.06			$	5.57
Diluted		$	1.28			$	1.85				$	4.06			$	5.57
Weighted average shares outstanding:
Shares of common stock			139,030				139,027					139,029				139,027
Dilutive potential shares of common stock			23				14					17				21
Total weighted average shares outstanding			139,053				139,041					139,046				139,048

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS (Unaudited) (In thousands)
			Three Months Ended
			Sep 30,				Jun 30,				Sep 30,
			2012				2012				2011
REVENUES
Floaters:
Ultra-Deepwater		$	195,574			$	233,071			$	220,415
Deepwater			163,816				142,565				217,379
Mid-water			319,491				310,462				377,127
Total Floaters			678,881				686,098				814,921
Jack-ups			35,146				40,163				46,540
Other			--				--				50
Total Contract Drilling Revenue		$	714,027			$	726,261			$	861,511
Revenues Related to Reimbursable Expenses		$	15,114			$	11,927			$	16,666
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater		$	132,705			$	137,087			$	119,868
Deepwater			58,029				68,653				57,662
Mid-water			135,935				160,642				163,957
Total Floaters			326,669				366,382				341,487
Jack-ups			24,245				29,240				43,281
Other			6,367				9,630				6,601
Total Contract Drilling Expense		$	357,281			$	405,252			$	391,369
Reimbursable Expenses		$	14,563			$	11,637			$	16,206
OPERATING INCOME
Floaters:
Ultra-Deepwater		$	62,869			$	95,984			$	100,547
Deepwater			105,787				73,912				159,717
Mid-water			183,556				149,820				213,170
Total Floaters			352,212				319,716				473,434
Jack-ups			10,901				10,923				3,259
Other			(6,367	)			(9,630	)			(6,551	)
Reimbursable expenses, net			551				290				460
Depreciation			(99,207	)			(99,469	)			(101,175	)
General and administrative expense			(13,476	)			(18,741	)			(14,879	)
Bad debt recovery (expense)			--				400				(4,734	)
Gain on disposition of assets			208				53,695				463
Total Operating Income		$	244,822			$	257,184			$	350,277

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
					September 30,				December 31,
					2012				2011
					(unaudited)
ASSETS
Current assets:
Cash and cash equivalents				$	316,599			$	333,765
Marketable securities					1,175,572				902,414
Accounts receivable, net of allowance for bad debts					463,219				563,934
Prepaid expenses and other current assets					143,441				192,570
Total current assets					2,098,831				1,992,683
Drilling and other property and equipment, net of
accumulated depreciation					4,835,715				4,667,469
Other assets					245,204				304,005
Total assets				$	7,179,750			$	6,964,157
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities				$	432,698			$	427,291
Long-term debt					1,496,004				1,495,823
Deferred tax liability					534,767				536,815
Other liabilities					174,851				171,165
Stockholders’ equity					4,541,430				4,333,063
Total liabilities and stockholders’ equity				$	7,179,750			$	6,964,157

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES AVERAGE DAYRATES AND UTILIZATION (Dayrate in thousands)
		Third Quarter						Second Quarter						Third Quarter
		2012						2012						2011
		Dayrate			Utilization			Dayrate			Utilization			Dayrate			Utilization
Ultra-Deepwater Floaters		$354			75%			$354			89%			$336			88%
Deepwater Floaters		$373			95%			$372			83%			$465			99%
Mid-Water Floaters		$258			71%			$262			66%			$268			70%
Jack-Ups		$98			56%			$94			49%			$84			44%

Source: Diamond Offshore Drilling, Inc.

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