Diamond Offshore Announces Fourth Quarter 2012 Results

  Diamond Offshore Announces Fourth Quarter 2012 Results

Business Wire

HOUSTON -- February 5, 2013

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             $ 740,623       $ 734,283       $ 2,936,066       $ 3,254,313
drilling
Revenues
related to             9,914          14,074         50,442           68,106    
reimbursable
expenses
Total revenues         750,537        748,357        2,986,508        3,322,419 
                                                                         
Operating
expenses:
Contract
drilling,              377,589         406,763         1,537,224         1,548,502
excluding
depreciation
Reimbursable           9,427           13,609          48,778            66,052
expenses
Depreciation           92,844          95,089          392,913           398,612
General and            14,837          16,334          64,640            65,310
administrative
Impairment of          62,437          --              62,437            --
assets
Bad debt               --              (1,300  )       (1,018    )       (6,713    )
recovery
Gain on
disposition of         (1,559  )       (414    )       (80,844   )       (4,758    )
assets
Total
operating              555,575        530,081        2,024,130        2,067,005 
expenses
                                                                         
Operating              194,962         218,276         962,378           1,255,414
income
                                                                         
Other income
(expense):
Interest               858             3,103           4,910             6,668
income
Interest               (9,436  )       (12,993 )       (46,216   )       (73,137   )
expense
Foreign
currency               (1,118  )       (3,985  )       (1,999    )       (8,588    )
transaction
gain (loss)
Other, net             (225    )       (854    )       (992      )       (1,086    )
                                                                         
Income before
income tax             185,041         203,547         918,081           1,179,271
expense
                                                                         
Income tax             (29,380 )       (15,057 )       (197,604  )       (216,729  )
expense
                                                                         
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              139,031         139,027         139,029           139,027
common stock
Dilutive
potential              31             9              19               11        
shares of
common stock
Total weighted
average shares         139,062        139,036        139,048          139,038   
outstanding
                                                                         
                                                                         

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            $ 740,623    $ 714,027    $ 734,283 
Revenue
                                                                     
Revenues Related to                $ 9,914      $ 15,114     $ 14,074  
Reimbursable Expenses
                                                                     
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            $ 377,589    $ 357,281    $ 406,763 
Expense
                                                                     
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           (14,837 )       (13,476 )       (16,334 )
expense
Impairment of assets                 (62,437 )       --              --
Bad debt recovery                    --              --              1,300
Gain on disposition of               1,559       208         414     
assets
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                499,660         563,934
          allowance for bad debts
                                                                     
          Prepaid expenses and other current         136,099         192,570
          assets
                                                                     
         Assets held for sale                       11,594          --
                                                                    
                    Total current assets             2,132,943       1,992,683
                                                                     
Drilling and other property and equipment,           4,864,972       4,667,469
net of accumulated depreciation
                                                                     
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          $ 7,235,286     $ 6,964,157
                    stockholders’ equity
                                                                     
                                                                     

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       $348      89%             $354      75%             $356      70%
Floaters
Deepwater             $372        85%             $373        95%             $422        97%
Floaters
Mid-Water             $268        70%             $258        71%             $271        60%
Floaters
Jack-Ups              $85         71%             $98         56%             $79         36%

Contact:

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