Diamond Offshore Announces Second Quarter 2017 Results

HOUSTON, July 31, 2017 /PRNewswire/ -- Diamond Offshore Drilling, Inc. (NYSE: 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 (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 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
(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

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

Diamond Offshore Drilling, Inc. Logo. (PRNewsFoto/Diamond Offshore Drilling, Inc.)

 

 

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