DO
$10.48
Diamond Offshore Drilling
($.41)
(3.76%)
Earnings Details
2nd Quarter June 2017
Monday, July 31, 2017 6:00:00 AM
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Summary

Diamond Offshore Drilling Beats

Diamond Offshore Drilling (DO) reported 2nd Quarter June 2017 earnings of $0.45 per share on revenue of $399.3 million. The consensus earnings estimate was $0.24 per share on revenue of $386.9 million. The Earnings Whisper number was $0.28 per share. Revenue grew 2.7% on a year-over-year basis.

Diamond Offshore Drilling Inc is a global offshore oil and gas drilling contractor. Its fleet offers a range of services worldwide in various markets, including the deep water, harsh environment, conventional semisubmersible and jack-up markets.

Results
Reported Earnings
$0.45
Earnings Whisper
$0.28
Consensus Estimate
$0.24
Reported Revenue
$399.3 Mil
Revenue Estimate
$386.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Diamond Offshore Announces Second Quarter 2017 Results

Diamond Offshore Drilling, Inc. (DO) today reported the following results for the second quarter of 2017:

Three Months Ended
Thousands of dollars, except per share data June 30, 2017
March 31, 2017
Change
Total revenues
$
399,289
$
374,226
7%
Operating income
20,824
50,859
(59)%
Adjusted operating income
92,092
50,859
81%
Net income
15,949
23,539
(32)%
Adjusted net income
62,273
23,539
165%
Earnings per diluted share
$
0.12
$
0.17
(29)%
Adjusted earnings per diluted share
$
0.45
$
0.17
165%

"I am pleased with our second quarter results with adjusted earnings per share of $0.45," said Marc Edwards, President and Chief Executive Officer. "Though the market remains challenged, Diamond Offshore secured two new contracts this quarter. Further, our operational efficiency continues to improve on the back of Pressure Control by the Hour?."

Results for the second quarter were impacted by impairment charges and related taxes of $46 million or $0.33 per diluted share, relating to the carrying value of two semisubmersible rigs.

As of June 30, 2017, the Company’s total contracted backlog was $2.9 billion, which represents 22 rig years of work.

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 844-492-6043 or 478-219-0839, for international callers. The conference ID number is 48696379. 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 (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 certain 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, litigation and disputes, 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,
2017
2016
2017
2016
Revenues:
Contract drilling
$
392,170
$
357,409
$
755,727
$
800,932
Revenues related to reimbursable expenses 7,119
31,338
17,788
58,358
Total revenues
399,289
388,747
773,515
859,290
Operating expenses:
Contract drilling, excluding depreciation 196,217
198,336
399,740
411,177
Reimbursable expenses
6,790
16,527
17,268
43,318
Depreciation
85,982
105,016
179,211
209,256
General and administrative
19,010
18,139
36,493
33,537
Impairment of assets
71,268
678,145
71,268
678,145
Gain on disposition of assets
(802)
(747)
(2,148)
(1,043)
Total operating expenses
378,465
1,015,416
701,832
1,374,390
Operating income (loss)
20,824
(626,669)
71,683
(515,100)
Other income (expense):
Interest income
396
269
571
442
Interest expense
(27,251)
(24,156)
(54,847)
(49,672)
Foreign currency transaction (loss) gain
(927)
(3,513)
160
(7,121)
Other, net
(62)
(12,046)
(125)
(11,468)
(Loss) income before income tax benefit
(7,020)
(666,115)
17,442
(582,919)
Income tax benefit
22,969
76,178
22,046
80,407
Net income (loss)
$
15,949
$
(589,937)
$
39,488
$
(502,512)
Income (loss) per share
$
0.12
$
(4.30)
$
0.29
$
(3.66)
Weighted-average shares outstanding:
Shares of common stock
137,224
137,170
137,199
137,166
Dilutive potential shares of common stock 3
-
36
-
Total weighted-average shares outstanding 137,227
137,170
137,235
137,166
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended
June 30,
March 31,
June 30,
2017
2017
2016
REVENUES
Floaters:
Ultra-Deepwater
$
282,535
$
243,465
$
214,102
Deepwater
66,905
67,943
67,191
Mid-Water
36,543
48,285
56,694
Total Floaters
385,983
359,693
337,987
Jack-ups
6,187
3,864
19,422
Total Contract Drilling Revenue
$
392,170
$
363,557
$
357,409
Revenues Related to Reimbursable Expenses $
7,119
$
10,669
$
31,338
CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater
$
136,661
$
141,873
$
127,185
Deepwater
31,340
33,080
34,776
Mid-Water
15,771
19,267
25,862
Total Floaters
183,772
194,220
187,823
Jack-ups
6,978
5,323
6,876
Other
5,467
3,980
3,637
Total Contract Drilling Expense
$
196,217
$
203,523
$
198,336
Reimbursable Expenses
$
6,790
$
10,478
$
16,527
OPERATING INCOME (LOSS)
Floaters:
Ultra-Deepwater
$
145,874
$
101,592
$
86,917
Deepwater
35,565
34,863
32,415
Mid-Water
20,772
29,018
30,832
Total Floaters
202,211
165,473
150,164
Jack-ups
(791)
(1,459)
12,546
Other
(5,467)
(3,980)
(3,637)
Reimbursable expenses, net
329
191
14,811
Depreciation
(85,982)
(93,229)
(105,016)
General and administrative expense
(19,010)
(17,483)
(18,139)
Impairment of assets
(71,268)
-
(678,145)
Gain on disposition of assets
802
1,346
747
Total Operating Income (Loss)
$
20,824
$
50,859
$
(626,669)
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
June 30,
December 31,
2017
2016
ASSETS
Current assets:
Cash and cash equivalents
$
160,969
$
156,233
Accounts receivable, net of allowance for bad debts
311,517
247,028
Prepaid expenses and other current assets
107,690
102,146
Asset held for sale
-
400
Total current assets
580,176
505,807
Drilling and other property and equipment, net of accumulated
depreciation
5,490,158
5,726,935
Other assets
122,929
139,135
Total assets
$
6,193,263
$
6,371,877
LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term borrowings
$
-
$
104,200
Other current liabilities
157,091
236,299
Long-term debt
1,981,458
1,980,884
Deferred tax liability
143,619
197,011
Other liabilities
119,277
103,349
Stockholders’ equity
3,791,818
3,750,134
Total liabilities and stockholders’ equity
$
6,193,263
$
6,371,877
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30,
2017
2016
Operating activities:
Net income (loss)
$
39,488
$
(502,512)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation
179,211
209,256
Loss on impairment of assets
71,268
678,145
Deferred tax provision
(54,425)
(162,531)
Other
28,883
7,093
Net changes in operating working capital
(87,544)
76,019
Net cash provided by operating activities
176,881
305,470
Investing activities:
Capital expenditures (including rig construction)
(71,889)
(533,412)
Proceeds from disposition of assets, net of disposal costs 4,077
167,298
Other
23
4,592
Net cash used in investing activities
(67,789)
(361,522)
Financing activities:
(Repayment of) proceeds from short-term borrowings, net
(104,200)
40,711
Other
(156)
(408)
Net cash (used in) provided by financing activities
(104,356)
40,303
Net change in cash and cash equivalents
4,736
(15,749)
Cash and cash equivalents, beginning of period
156,233
119,028
Cash and cash equivalents, end of period
$
160,969
$
103,279
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES
AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY
(Dayrate in thousands)
Second Quarter
First Quarter
Second Quarter
2017
2017
2016
Average Dayrate Utilization Operational Efficiency Average Dayrate Utilization Operational Efficiency Average Dayrate Utilization Operational Efficiency
(1)
(2)
(3)
(1)
(2)
(3)
(1)
(2)
(3)
Ultra-Deepwater Floaters $436
59%
97.1%
$450
50%
91.1%
$452
47%
86.7%
Deepwater Floaters
$270
45%
96.0%
$260
48%
96.6%
$301
35%
100.0%
Mid-Water Floaters
$397
20%
100.0%
$268
40%
100.0%
$313
30%
99.4%
Jack-ups
$75
86%
90.8%
$75
29%
99.9%
$335
13%
100.0%
Fleet Total
96.6%
94.3%
92.7%
(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).
Our current fleet includes three ultra-deepwater and three deepwater semisubmersible rigs that are 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.

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.

In order to fully assess the financial operating results of the Company, management believes that the results of operations adjusted to exclude the second quarter 2017 and 2016 asset impairments, as well as the related tax effects thereof, and other discrete tax items are appropriate measures of the continuing and normal operations of the Company. However, these measures should be considered in addition to, and not as a substitute for, or superior to, contract drilling revenue, contract drilling expense, operating income, cash flows from operations or other measures of financial performance prepared in accordance with GAAP.

Three Months Ended
June 30,
June 30,
2017
2016
Reconciliation of As Reported Operating Income (Loss) to
Adjusted Operating Income:
(In thousands)
As reported operating income (loss)
$
20,824
$
(626,669)
Impairments and other charges:
Impairment of rigs and associated inventory (1)
71,268
678,145
Adjusted operating income
$
92,092
$
51,476
Reconciliation of As Reported Net Income (Loss) to
Adjusted Net Income:
(In thousands)
As reported net income (loss)
$
15,949
$
(589,937)
Impairments and other charges:
Impairment of rigs and associated inventory (1)
71,268
678,145
Tax effect of impairments and other charges:
Impairment of rigs and associated inventory (2)
(24,944)
(143,165)
Discrete tax items (3)
-
77,252
Adjusted net income
$
62,273
$
22,295
Three Months Ended
June 30,
June 30,
2017
2016
Reconciliation of As Reported Income (Loss) per Diluted
Share to Adjusted Earnings per Diluted Share:
As reported income (loss) per diluted share
$
0.12
$
(4.30)
Impairments and other charges:
Impairment of rigs and associated inventory (1)
0.51
4.94
Tax effect of impairments and other charges:
Impairment of rigs and associated inventory (2)
(0.18)
(1.04)
Other discrete tax items (3)
-
0.56
Adjusted earnings per diluted share
$
0.45
$
0.16
(1) Represents the aggregate amount of impairment losses recognized during (i) the second quarter of 2017 related to two semisubmersible drilling rigs and (ii) the second quarter of 2016 related to eight drilling rigs and associated inventory.
(2) Represents the income tax effects of the aggregate impairment losses recognized in the second quarters of 2017 and 2016.
The income tax effects of the impairment losses have been calculated on a discrete tax basis, utilizing the statutory tax rates for the applicable tax jurisdictions of the rig-owning companies. We believe that this approach provides investors and others with useful information regarding the actual tax impact of these transactions when the appropriate tax returns are filed with the taxing authorities.
(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 AliSr. Director, Investor Relations & Corporate Development(281) 647-4035

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