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Diamond Offshore Drilling Inc. Reports Operating Results (10-K)

February 23, 2012 | About:
10qk

10qk

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Diamond Offshore Drilling Inc. (DO) filed Annual Report for the period ended 2011-12-31.

Diamond Offshor has a market cap of $9.01 billion; its shares were traded at around $67.03 with a P/E ratio of 9.4 and P/S ratio of 2.7. The dividend yield of Diamond Offshor stocks is 0.8%. Diamond Offshor had an annual average earning growth of 36.2% over the past 10 years. GuruFocus rated Diamond Offshor the business predictability rank of 2.5-star.

Highlight of Business Operations:

Operating Income. Total operating income in 2011 decreased $170.0 million, or 12%, compared to 2010, despite a $24.6 million, or 1%, increase in total contract drilling revenue during 2011. Revenue generated by our floater rigs increased an aggregate $95.1 million, or 3%, in 2011 compared to 2010, while revenue generated by our jack-up fleet declined $70.4 million or 26%. Except for our deepwater floaters, average daily revenue earned by our other rigs during 2011 compared unfavorably to the levels attained in 2010. Utilization for our ultra-deepwater and deepwater floaters increased significantly in 2011 compared to 2010; however, utilization for our mid-water floater and jack-ups fleets decreased in 2011. One additional mid-water floater and one jack-up rig were cold stacked during 2011. Our two newest floaters, the Ocean Courage and Ocean Valor, which began operating under contract late in the first quarter and in the fourth quarter of 2010, respectively, contributed incremental revenue of $162.0 million during 2011.

Operating Income. Operating income in 2010 decreased $477.8 million, or 25%, compared to 2009. Our operating results were negatively impacted by a decline in average daily revenue earned by our rigs in 2010 from the levels attained in 2009. While our contracted revenue backlog enabled us to partially mitigate the impact of the weakened market conditions at the time, our total contract drilling revenue decreased $306.8 million, or 9%, compared to 2009. Revenue generated by our floater fleet decreased an aggregate $117.8 million, or 4%, and revenue for our jack-up fleet decreased $189.2 million, or 41%, during 2010 compared to the previous year. During 2010, we cold stacked three additional rigs in the GOM, consisting of two mid-water floaters that returned from Mexico during the year and one jack-up rig. However, the Ocean Courage and Ocean Valor, which commenced drilling operations during 2010, contributed $109.3 million to our revenue during 2010. Total contract drilling expense increased $167.3 million, or 14%, in 2010 compared to 2009, and included normal operating costs for the Ocean Courage and Ocean Valor, as well as increased amortized mobilization costs and higher other operating costs associated with rigs operating internationally rather than domestically.

Ultra-Deepwater Floaters. Revenue generated by our ultra-deepwater floaters increased $123.1 million during 2011 compared to 2010. Our newest rigs, the Ocean Courage and Ocean Valor, were under contract in Brazil for all of 2011 and worked a combined 353 incremental revenue earning days, compared to 2010, generating $162.0 million in incremental revenue. However, aggregate revenue earned by our six other ultra-deepwater rigs decreased $38.9 million in 2011 compared to 2010, due to a reduction in average daily revenue earned ($71.5 million), partially offset by an increase in revenue earning days ($57.2 million) due to the absence of downtime in 2011 associated with the relocation of the Ocean Endeavor, Ocean Confidence and Ocean Baroness from the GOM to international locations in the previous year. In addition, 2011 revenue was unfavorably impacted by the absence of a $30.7 million contract termination fee earned by the Ocean Endeavor in July 2010, partially offset by higher recognition of mobilization revenue during 2011 ($6.1 million). Contract drilling expense for our ultra-deepwater floaters increased $172.5 million in 2011 compared to 2010, and included $75.4 million in incremental contract drilling expense from the operation of the Ocean Courage and Ocean Valor, $16.6 million in incremental mobilization expenses, and higher overall contract drilling expenses for the remainder of our fleet, including personnel related, maintenance and hull insurance costs, as well as higher costs associated with operating rigs internationally, such as freight, non-income based taxes, revenue-based agency fees and shorebase support costs.

Mid-Water Floaters. Revenue generated by our mid-water floaters decreased $196.8 million in 2011 compared to 2010, primarily due to 546 fewer revenue earning days ($153.4 million) combined with a decrease in average daily revenue earned ($59.3 million) in 2011. The decrease in revenue earning days was primarily attributable to 963 additional cold stacked days in 2011 compared to 2010, partially offset by fewer warm stacked days between contracts (282 fewer days), unpaid downtime for repairs (84 fewer days) and rig mobilization days (51 fewer days). The decline in revenue was partially offset by higher mobilization fees recognized during 2011 ($15.9 million) compared to 2010, primarily due to a $24.0 million demobilization fee earned by the Ocean Yorktown upon completion of its contract offshore Brazil. Contract drilling expense decreased $8.9 million during 2011 compared to 2010. Contributing to the overall decrease in contract drilling expense between periods was a $67.6 million reduction in costs associated with cold stacked rigs, partially offset by higher contract drilling expense for our actively-marketed fleet of 16 mid-water floaters. Cost increases in 2011, compared to 2010, included personnel-related costs ($21.7 million), repairs and maintenance expenses ($4.3 million), shorebase support and overhead costs ($16.7 million), as well as costs associated with the demobilization of the Ocean Yorktown to the GOM in advance of the rigs future work in Mexico in early 2012.

Ultra-Deepwater Floaters. Revenue generated by our ultra-deepwater floaters decreased $27.6 million during 2010 compared to 2009. Our newest ultra-deepwater rigs, the Ocean Courage and Ocean Valor, generated $109.3 million in revenue during 2010 and worked a combined 280 revenue earning days. However, aggregate revenue earned by our other six ultra-deepwater rigs decreased $137.0 million in 2010 compared to 2009, due to 437 fewer revenue earning days ($160.4 million), largely resulting from effects of the April 20, 2010 Macondo well blowout in the GOM, as well as a decrease in average daily revenue earned ($19.3 million). The decline in 2010 revenue was partially offset by the recognition of $12.0 million in incremental mobilization revenue, compared to the prior year, and the receipt of a $30.7 million contract termination fee from a previous customer of the Ocean Endeavor in July 2010. The decrease in revenue earning days in 2010 was primarily attributable to increased downtime associated with incremental mobilization, contract preparation and customer acceptance days for three of our ultra-deepwater rigs that were relocated from the GOM to international locations in 2010 and unplanned downtime due to a force majeure assertion by one of our customers in the GOM following the Macondo incident. Contract drilling expense for our ultra-deepwater floaters increased $111.0 million in 2010 compared to 2009, and included $85.1 million in incremental contract drilling expense incurred by the Ocean Courage and Ocean Valor, as well as $11.7 million in incremental mobilization expenses. Contract drilling expense in 2010 also reflected higher maintenance, inspection, freight, non-income based taxes and other revenue-based fees, partially offset by lower personnel and related costs, including a lower U.S. labor component as more of our rigs worked internationally in 2010 compared to the prior year.

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