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

July 26, 2012 | About:
10qk

10qk

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Diamond Offshore Drilling Inc. (DO) filed Quarterly Report for the period ended 2012-06-30.

Diamond Offshore Drilling, Inc. has a market cap of $9.18 billion; its shares were traded at around $65.51 with a P/E ratio of 12 and P/S ratio of 2.8. The dividend yield of Diamond Offshore Drilling, Inc. stocks is 0.8%. Diamond Offshore Drilling, Inc. had an annual average earning growth of 29.9% over the past 10 years. GuruFocus rated Diamond Offshore Drilling, Inc. the business predictability rank of 2.5-star.

Highlight of Business Operations:

Operating Income. Operating income decreased $110.4 million, or 30%, during the second quarter of 2012, compared to the same period of 2011, due to the combined effect of a reduction in contract drilling revenue earned and an increase in contract drilling expense incurred. Aggregate revenue for our floater and jack-up fleets decreased $143.4 million, or 16%, compared to the second quarter of 2011, while contract drilling expense increased $17.2 million, or 4%, compared to the same period. Contract drilling revenue for the second quarter of 2012 was negatively impacted by an aggregate 647-day decrease in revenue earning days for our fleet, as well as a decrease in average daily revenue earned by our deepwater and mid-water floater fleets, compared to the second quarter of 2011. In the first half of 2012, we sold six of our jack-up rigs, three of which were operating under contract during the second quarter of 2011. We recognized an aggregate pre-tax gain of $51.7 million on the sale of five of these rigs during the second quarter of 2012.

Operating Income. Operating income decreased $164.3 million, or 24%, during the first six months of 2012, compared to the same period of 2011, due to the combined effect of an 11% decline in total contract drilling revenue and a 7% increase in contract drilling expense. Both revenue earning days and average daily revenue earned by our deepwater and mid-water floaters declined during the first half of 2012, compared to the first six months of 2011, resulting in a $200.1 million reduction in revenue, while favorable market conditions for our ultra deepwater floaters resulted in a $45.7 million increase in contract drilling revenue. Revenue for our jack-up fleet decreased $22.6 million during the first half of 2012, compared to the first half of 2011, primarily due to the sale of six of our jack-up rigs during the first half of 2012, three of which were operating in the first half of 2011. However, the sale of these six rigs resulted in the recognition of an aggregate pre-tax gain of $76.6 million in the first six months of 2012.

Ultra-Deepwater Floaters. Revenue generated by our ultra-deepwater floaters remained stable during the second quarter of 2012, decreasing only $0.2 million from the prior year quarter. The decline in revenue was primarily due to 17 fewer revenue earning days ($5.8 million) during the current year quarter, resulting from 51 days of incremental downtime for surveys and shipyard projects, partially offset by 34 fewer non-operating days for repairs, and a $3.7 million decrease in mobilization revenue recognized in the second quarter of 2012 compared to the same period of 2011. These negative factors were partially offset by an increase in average daily revenue earned ($9.3 million) by our ultra-deepwater floaters during the second quarter of 2012, primarily due to a higher dayrate earned by the Ocean Monarch operating offshore Vietnam in the second quarter of 2012 compared to the rate earned by the rig operating in the GOM in the second quarter of 2011. Contract drilling expense incurred by our ultra-deepwater floaters during the second quarter of 2012 increased $4.2 million, reflecting higher personnel related costs, inspection costs, freight, travel and shorebase support costs, including costs associated with maintaining support offices in West Africa and Vietnam, partially offset by lower amortized mobilization costs than in the comparable quarter of 2011.

Ultra-Deepwater Floaters. Revenue generated by our ultra-deepwater floaters increased $45.7 million during the first half of 2012, compared to the same period in 2011, primarily due to the effects of higher average daily revenue earned by our aggregate fleet ($22.4 million) and 47 incremental revenue earning days ($16.2 million) during the first six months of 2012. The increase in revenue earning days was primarily due to the inclusion of 112 incremental revenue earnings days for the Ocean Monarch during the first half of 2012, compared to the same period in 2011 when the rig incurred unplanned downtime due to a force majeure assertion by a customer, which was ultimately settled in the second quarter of 2011. The increase in revenue earning days attributable to the Ocean Monarch was partially offset by downtime days for surveys and shipyard projects, as well as unscheduled downtime for repairs for other rigs in our ultra-deepwater fleet during the first half of 2012. We also recognized an additional $7.0 million in deferred mobilization revenue in the first six months of 2012, compared to the same period in 2011, primarily due to the recognition of revenue associated with the Ocean Monarchs mobilization to Vietnam ($16.2 million), partially offset by a reduction in revenue recognized by our other ultra-deepwater rigs due to the full amortization of fees associated with other rigs moving out of the GOM prior to 2012.

Mid-Water Floaters. Revenue generated by our mid-water floaters decreased $163.6 million during the first half of 2012, compared to the same period in 2011, primarily due to 602 fewer revenue earning days ($162.5 million), reflecting an increase in planned downtime for mobilization and shipyard projects (235 additional days), as well as unplanned downtime for repairs and the warm stacking of rigs between contracts (293 additional days). The decrease in revenue earning days during the first half of 2012 was partially offset by 91 fewer cold-stacked days during the period as a result of our decision to upgrade the Ocean Onyx at the end of 2011 for deepwater service, offset by the cold stacking of the Ocean Epoch in the first quarter of 2011. Additionally, the decline in average daily revenue earned ($13.0 million) during the first six months of 2012 was partially offset by the recognition of an additional $11.9 million in mobilization revenue, including an aggregate $18.0 million in mobilization fees recognized for the Ocean Guardian and the Ocean Saratoga associated with their now completed contracts in the Falkland Islands and offshore Guyana, respectively. Contract drilling expense increased $21.5 million during the first half of 2012, compared to the same period in 2011, primarily due to the recognition of costs associated with the 2012 demobilization and subsequent shipyard project for the Ocean Guardian, the mobilization of the Ocean Saratoga to Guyana and subsequent return and the demobilization of the Ocean Whittington to the GOM ($25.1 million), partially offset by reduced contract drilling expense attributable to the cold stacking of the Ocean Epoch in early 2011.

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