Market Overview

Diamond Offshore Announces Fourth Quarter 2012 Results

HOUSTON--(BUSINESS WIRE)--

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%

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

 

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