Diamond Offshore Announces Third Quarter 2017 Results

Three Months Ended

September 30, 2017

June 30, 2017

Change

Total revenues

$               366,023

$           399,289

(8)

%

Operating income

58,581

20,824

181

%

Adjusted operating income

58,581

92,092

(36)

%

Net income

10,799

15,949

(32)

%

Adjusted net income

33,787

62,273

(46)

%

Earnings per diluted share

$                     0.08

$                 0.12

(33)

%

Adjusted earnings per diluted share

$                     0.25

$                 0.45

(44)

%

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Revenues:

Contract drilling

$   357,683

$   339,636

$ 1,113,410

$ 1,140,568

Revenues related to reimbursable expenses

8,340

9,542

26,128

67,900

Total revenues

366,023

349,178

1,139,538

1,208,468

Operating expenses:

Contract drilling, excluding depreciation

198,072

186,654

597,812

597,831

Reimbursable expenses

8,220

7,965

25,488

51,283

Depreciation

83,281

86,473

262,492

295,729

General and administrative

17,806

15,237

54,299

48,774

Impairment of assets

-

-

71,268

678,145

Loss (gain) on disposition of assets

63

(1,222)

(2,085)

(2,265)

Total operating expenses

307,442

295,107

1,009,274

1,669,497

Operating income (loss)

58,581

54,071

130,264

(461,029)

Other income (expense):

Interest income

776

150

1,347

592

Interest expense

(28,562)

(19,032)

(83,409)

(68,704)

Foreign currency transaction loss

(677)

(712)

(517)

(7,833)

Loss on extinguishment of senior notes

(35,366)

-

(35,366)

-

Other, net

1,447

269

1,322

(11,199)

(Loss) income before income tax benefit

(3,801)

34,746

13,641

(548,173)

Income tax benefit (expense)

14,600

(20,819)

36,646

59,588

Net income (loss)

$     10,799

$     13,927

$     50,287

$   (488,585)

Income (loss) per share

$         0.08

$         0.10

$         0.37

$        (3.56)

Weighted-average shares outstanding:

Shares of common stock

137,227

137,170

137,208

137,167

Dilutive potential shares of common stock

14

84

29

-

Total weighted-average shares outstanding

137,241

137,254

137,237

137,167

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(Unaudited)            

(In thousands)            

Three Months Ended

September 30,

June 30,

September 30,

2017

2017

2016

REVENUES

Floaters:

Ultra-Deepwater

$         275,859

$         282,535

$        217,275

Deepwater

35,634

66,905

66,011

Mid-water

39,616

36,543

56,350

Total Floaters

351,109

385,983

339,636

Jack-ups

6,574

6,187

-

Total Contract Drilling Revenue

$         357,683

$         392,170

$        339,636

Revenues Related to Reimbursable Expenses

$             8,340

$             7,119

$            9,542

CONTRACT DRILLING EXPENSE

Floaters:

Ultra-Deepwater

$         139,619

$         136,661

$        124,099

Deepwater

27,139

31,340

36,226

Mid-water

17,753

15,771

17,634

Total Floaters

184,511

183,772

177,959

Jack-ups

6,197

6,978

1,833

Other 

7,364

5,467

6,862

Total Contract Drilling Expense

$         198,072

$         196,217

$        186,654

Reimbursable Expenses

$             8,220

$             6,790

$            7,965

OPERATING INCOME

Floaters:

Ultra-Deepwater

$         136,240

$         145,874

$          93,176

Deepwater

8,495

35,565

29,785

Mid-water

21,863

20,772

38,716

Total Floaters

166,598

202,211

161,677

Jack-ups

377

(791)

(1,833)

Other 

(7,364)

(5,467)

(6,862)

Reimbursable expenses, net

120

329

1,577

Depreciation

(83,281)

(85,982)

(86,473)

General and administrative expense

(17,806)

(19,010)

(15,237)

Impairment of assets

-

(71,268)

-

(Loss) gain on disposition of assets

(63)

802

1,222

     Total Operating Income

$           58,581

$           20,824

$          54,071

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

September 30,

December 31,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents

$         276,686

$         156,233

Accounts receivable, net of allowance for bad debts  

271,390

247,028

Prepaid expenses and other current assets  

97,803

102,146

Assets held for sale  

2,598

400

Total current assets

648,477

505,807

Drilling and other property and equipment, net of accumulated

depreciation

5,432,689

5,726,935

Other assets

117,062

139,135

Total assets

$      6,198,228

$      6,371,877

LIABILITIES AND STOCKHOLDERS' EQUITY

Short-term borrowings

$                     -

$         104,200

Other current liabilities

180,970

236,299

Long-term debt

1,971,852

1,980,884

Deferred tax liability

124,929

197,011

Other liabilities

115,715

103,349

Stockholders' equity

3,804,762

3,750,134

Total liabilities and stockholders' equity

$      6,198,228

$      6,371,877

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended

September 30,

2017

2016

Operating activities:

Net income (loss)

$           50,287

$        (488,585)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities

Depreciation  

262,492

295,729

Loss on impairment of assets

71,268

678,145

Loss on extinguishment of senior notes

35,366

-

Deferred income, net

8,379

(23,381)

Deferred expenses, net

32,701

(1,099)

Deferred tax provision  

(73,873)

(114,405)

Other  

2,090

17,976

Net changes in operating working capital  

(22,075)

127,614

Net cash provided by operating activities

366,635

491,994

Investing activities:

Capital expenditures (including rig construction)

(100,613)

(598,236)

Proceeds from disposition of assets, net of disposal costs  

4,017

169,038

Other  

31

4,603

Net cash used in investing activities

(96,565)

(424,595)

Financing activities:

Redemption of senior notes

(500,000)

-

Payment of debt extinguishment costs

(34,395)

-

Proceeds from issuance of senior notes

496,360

-

Net repayment of short-term borrowings

(104,200)

(104,489)

Other  

(7,382)

(609)

Net cash used in financing activities

(149,617)

(105,098)

Net change in cash and cash equivalents

120,453

(37,699)

Cash and cash equivalents, beginning of period

156,233

119,028

Cash and cash equivalents, end of period  

$         276,686

$           81,329

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY

(Dayrate in thousands)

2017

2017

2016

Utilization
⁽²⁾

Operational
Efficiency
⁽³⁾

Average
Dayrate
⁽¹⁾

Utilization
⁽²⁾

Operational
Efficiency
⁽³⁾

Average
Dayrate
⁽¹⁾

Utilization
⁽²⁾

Operational
Efficiency
⁽³⁾

Ultra-Deepwater Floaters

$407

61%

92.0%

$436

59%

97.1%

$452

48%

87.1%

Deepwater Floaters

$195

33%

99.6%

$270

45%

96.0%

$303

34%

94.5%

Mid-Water floaters

$322

27%

98.8%

$397

20%

100.0%

$311

33%

98.4%

Jack-ups

$75

95%

95.3%

$75

86%

90.8%

--

--

--

Fleet Total

94.3%

96.6%

91.0%

(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.

Three Months Ended

September 30,

June 30,

2017

2017

Reconciliation of As Reported Operating Income to
Adjusted Operating Income:

(In thousands)

As reported operating income

$         58,581

$          20,824

Impairments and other charges:

Impairment of rigs⁽¹⁾

-

71,268

Adjusted operating income

$         58,581

$          92,092

Reconciliation of As Reported Net Income to Adjusted
Net Income:

(In thousands)

As reported net income

$         10,799

$          15,949

Impairments and other charges:

Impairment of rigs⁽¹⁾

-

71,268

Loss on extinguishment of senior notes ⁽²⁾

35,366

-

Tax effect of impairments and other charges:

Impairment of rigs ⁽³⁾

-

(24,944)

Loss on extinguishment of senior notes ⁽⁴⁾

(12,378)

-

Adjusted net income

$         33,787

$          62,273

(1)

Represents the aggregate amount of impairment loss recognized during the second quarter of 2017 related to two semisubmersible drilling rigs. 

(2)

Represents the loss recognized during the third quarter of 2017 related to the redemption of our 5.875% senior notes due 2019.

(3)

Represents the income tax effect of the aggregate impairment loss recognized in the second quarter of 2017.  The income tax effect of the impairment loss has 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.

(4)

Represents the income tax effect of the loss on extinguishment of the 2019 senior notes recognized in the third quarter of 2017.  The income tax effect of the loss was calculated using the U.S. corporate tax rate.