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Diamond Offshore Drilling, Inc. Announces Second Quarter 2005 Results

Posted on: Wednesday, 27 July 2005, 09:00 CDT

Diamond Offshore Drilling, Inc. (NYSE:DO) today reported net income of $41.3 million, or $0.31 per share on a diluted basis for the second quarter of 2005, compared to a net loss of $10.5 million, or $0.08 per share on a diluted basis, in the same period a year earlier. Revenues for the second quarter of 2005 were $283.4 million, compared to revenues of $184.9 million for the second period in 2004.

For the six months ended June 30, 2005, the Company reported net income of $71.4 million, or $0.53 per share on a diluted basis, compared to a net loss of $21.5 million, or $0.17 per share on a diluted basis for the same period in 2004. Revenue for the six months ended June 30, 2005, was $542.2, compared to $369.1 million for the first six months of 2004.

The improvement in operating results reflects a continuation of higher dayrates and rig utilization across the Company's entire fleet, and is indicative of the strength of the worldwide offshore drilling market. Results for the second quarter also reflect the sale of the cold-stacked semisubmersible Ocean Liberator in mid-June, 2005. The 600-ft. water-depth-rated unit was sold for $14.0 million, for which the Company recognized an after-tax gain of $5.9 million. This gain was largely offset by the after-tax write-off of $5.0 million of previously deferred loan origination fees related to Diamond Offshore's Zero Coupon Convertible debt, 96% of which was redeemed by the Company on June 6, 2005. The previously deferred fees are included as interest expense on the Company's Income Statement for the second quarter ended June 30, 2005.

The Company has entered into a Letter of Intent (LOI) to utilize the Ocean Endeavor in the Gulf of Mexico for a period of between two and four years, commencing when the rig is expected to be delivered from the shipyard in the first quarter of 2007. If a definitive agreement is executed, the rig could earn approximate total revenue of between $198 million and $355 million, depending upon the length of the contract selected by the operator. Actual revenues received could be reduced by various operating factors including utilization rates. The Endeavor, a Victory-class semisubmersible rig, is currently being upgraded in Singapore for ultra-deepwater service. The LOI is subject to customary conditions including execution of a definitive agreement.

Larry Dickerson, President and Chief Operating Officer, said, "Approximately 89% of Diamond Offshore's fleet is contracted or committed for the remainder of 2005, and we are currently booking significant work into 2006, with about 50% of our fleet contracted or committed for next year. Assuming fulfillment of these contracts and commitments, our total potential revenue commitment of $2.8 billion is now the largest dollar backlog we have ever experienced. We remain confident in the strength of our markets, and believe that our exposure to the market in late 2006 and 2007 will allow the Company to participate in any future market improvements."

Diamond Offshore provides contract drilling services to the energy industry around the globe and is a leader in deepwater drilling. The Company's fleet of 44 offshore drilling rigs consists of 29 semisubmersibles, 14 jack-ups and one drillship.

As previously announced, Diamond Offshore will provide a simulcast and rebroadcast of its second quarter 2005 earnings release conference call. The live broadcast of the Diamond Offshore Drilling, Inc. quarterly conference call will be available online at www.diamondoffshore.com on July 27, 2005, beginning at 9:00 a.m. Central Time. The online replay will follow immediately and continue for the remainder of the second calendar quarter after the original call. Please go to the web site at least 15 minutes before the broadcast to register, download and install any necessary audio software.

Statements in this press release contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, but are not limited to, statements concerning commitments for drilling work or contracts, future dayrates, future contract revenues, the term and start date of future contracts, entry into definitive agreements, consummation of awarded contracts, satisfaction of conditions precedent, future growth in demand for equipment types or in any region, future cash flows, and future contracts. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated or projected, including, among others, the risk that a notification of contract award, letter of intent, or verbal contract commitment may not result in a binding contract, the risk that a binding contract could be terminated, the risk that the markets for the Company's services will not continue to improve, the risk that full rig utilization may not be achieved during a contract period, or the risk that factors outside of the Company's control may adversely impact the amount of profit realized from a contract

. A discussion of additional risk factors that could impact these areas and the Company's overall business and financial performance can be found in the Company's reports and other filings with the Securities and Exchange Commission. These factors include, among others, general economic and business conditions, 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 concerns, 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, --------------------------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Revenues: Contract drilling $272,665 $176,685 $522,687 $353,925 Revenues related to reimbursable expenses 10,734 8,261 19,470 15,219 --------- --------- --------- --------- Total revenues 283,399 184,946 542,157 369,144 --------- --------- --------- --------- Operating expenses: Contract drilling 162,489 133,483 310,703 268,161 Reimbursable expenses 9,099 7,519 16,434 13,753 Depreciation 45,978 44,554 91,450 89,074 General and administrative 9,186 8,760 18,659 17,549 (Gain) loss on sale of assets (8,250) 130 (7,992) (195) --------- --------- --------- --------- Total operating expenses 218,502 194,446 429,254 388,342 --------- --------- --------- --------- Operating loss 64,897 (9,500) 112,903 (19,198) Other income (expense): Interest income 6,128 3,114 11,896 4,682 Interest expense (15,756) (6,373) (25,323) (12,727) Gain (loss) on sale of marketable securities 77 283 (1,197) 258 Other, net 445 (257) 870 (411) --------- --------- --------- --------- Income (loss) before income tax (expense) benefit 55,791 (12,733) 99,149 (27,396) Income tax (expense) benefit (14,509) 2,238 (27,749) 5,929 --------- --------- --------- --------- Net Income (loss) $41,282 $(10,495) $71,400 $(21,467) ========= ========= ========= ========= Income (loss) per share: Basic $0.32 $(0.08) $0.56 $(0.17) ========= ========= ========= ========= Diluted $0.31 $(0.08) $0.53 $(0.17) ========= ========= ========= ========= Weighted average shares outstanding: Shares of common stock 128,590 129,322 128,582 129,322 Dilutive potential shares of common stock 9,544 -- 9,550 - --------- --------- --------- --------- Total weighted average shares outstanding 138,134 129,322 138,132 129,322 ========= ========= ========= ========= DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS (Unaudited) (In thousands) Three Months Ended June 30, -------------------------- 2005 2004 -------------------------- REVENUES High Specification Floaters $97,579 $59,088 Other Semisubmersibles 112,359 75,128 Jack-ups 63,160 42,304 Other (433) 165 -------------------------- Total Contract Drilling Revenue $272,665 $176,685 ========================== Revenues Related to Reimbursable Expenses $10,734 $8,261 ========================== CONTRACT DRILLING EXPENSE High Specification Floaters $46,011 $40,668 Other Semisubmersibles 80,873 67,960 Jack-ups 32,751 24,082 Other 2,854 773 -------------------------- Total Contract Drilling Expense $162,489 $133,483 ========================== Reimbursable Expenses $9,099 $7,519 ========================== OPERATING INCOME (LOSS) High Specification Floaters $51,568 $18,420 Other Semisubmersibles 31,486 7,168 Jack-ups 30,409 18,222 Other (3,287) (608) Reimbursables, net 1,635 742 Depreciation Expense (45,978) (44,554) General and Administrative Expense (9,186) (8,760) Gain (loss) on Sale of Assets 8,250 (130) -------------------------- Total Operating Income (Loss) $64,897 $(9,500) ========================== DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, ------------------------- 2005 2004 ------------ ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $687,879 $266,007 Investments and marketable securities 302,335 661,849 Accounts receivable 263,227 187,558 Rig inventory and supplies 47,631 47,590 Prepaid expenses and other 37,682 32,677 ------------ ------------ Total current assets 1,338,754 1,195,681 Drilling and other property and equipment, net of Accumulated depreciation 2,191,437 2,154,593 Other assets 24,333 29,112 ------------ ------------ Total assets $3,554,524 $3,379,386 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $12,818 $484,102 Accrued investment purchase 299,633 -- Other current liabilities 126,125 129,805 ------------ ------------ Total current liabilities 438,576 613,907 Long-term debt: 4.875% Senior Notes Due 2015 249,464 -- Other long-term debt 727,836 709,413 ------------ ------------ Total long-term debt 977,300 709,413 Deferred tax liability 392,278 369,722 Other liabilities 62,006 60,516 Stockholders' equity 1,684,364 1,625,828 ------------ ------------ Total liabilities and stockholders' equity $3,554,524 $3,379,386 ============ ============ DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES AVERAGE DAYRATES AND UTILIZATION Second Quarter First Quarter Second Quarter 2005 2005 2004 --------------------------------------------------------------------- Utili- Utili- Utili- Dayrate zation Dayrate zation Dayrate zation --------------------------------------------------------------------- (Dayrate in thousands) High Specification Floaters $122 88% $109 96% $98 66% Other Semi- submersibles $73 87% $65 83% $55 71% Jack-ups $52 92% $48 96% $37 90%

Source: Business Wire

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