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

October 25, 2012 | About:
Dividend Growth Investor

10qk

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Diamond Offshore Drilling Inc. (DO) filed Quarterly Report for the period ended 2012-09-30.

Diamond Offshore Drilling, Inc. has a market cap of $9.8 billion; its shares were traded at around $70.38 with a P/E ratio of 14.3 and P/S ratio of 3. The dividend yield of Diamond Offshore Drilling, Inc. stocks is 0.7%. 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 $269.7 million, or 26%, during the first nine months of 2012, compared to the same period of 2011, and reflected a $324.6 million, or 13%, reduction in total contract drilling revenue and a $17.9 million, or 2%, increase in contract drilling expense, partially offset by the recognition of a $76.5 million pre-tax gain on the sale of six jack-up rigs in 2012, including three rigs that were operating in the first nine months of 2011. Both revenue earning days and average daily revenue earned by our deepwater and mid-water floaters declined during the first nine months of 2012, compared to the first nine months of 2011, resulting in a $311.3 million reduction in revenue, while continued favorable market conditions for our ultra deepwater floaters resulted in a $20.8 million increase in contract drilling revenue. Revenue for our jack-up fleet decreased $34.0 million during the first nine months of 2012, compared to the same period of 2011, primarily due to the sale of the six jack-up rigs in 2012.

Mid-Water Floaters. Revenue generated by our mid-water floaters decreased $57.6 million during the third quarter of 2012, compared to the same quarter in 2011, primarily due to 66 fewer revenue earning days ($17.7 million), the effect of a lower average daily revenue earned ($12.1 million), and the absence of a $24.0 million demobilization fee received by the Ocean Yorktown upon completion of its contract offshore Brazil in the third quarter of 2011. The decline in revenue earning days during the third quarter of 2012 was primarily attributable to unplanned downtime for repairs and the warm stacking of rigs between contracts (148 additional days), partially offset by less planned downtime for the mobilization of rigs and shipyard projects (81 fewer days). Contract drilling expense decreased $28.0 million during the third quarter of 2012, compared to the same period in 2011, primarily due to lower recognized mobilization costs, primarily for the Ocean Yorktown ($10.4 million), and lower repair and maintenance ($10.6 million), personnel related ($4.4 million) and inspection costs ($2.1 million) incurred during the 2012 quarter.

Ultra-Deepwater Floaters. Revenue generated by our ultra-deepwater floaters increased $20.8 million during the first nine months of 2012, compared to the first nine months of 2011, primarily due to the effect of higher average daily revenue earned by our ultra-deepwater fleet ($33.1 million), partially offset by a decrease in incremental revenue earning days ($17.3 million) during the first nine months of 2012. The increase in average daily revenue earned was primarily attributable to a higher dayrate earned by the Ocean Monarch operating offshore Vietnam during the first nine months of 2012, compared to the rate earned by the rig operating in the GOM for much of the 2011 period. The decrease in revenue earning days was primarily the result of additional downtime days for surveys and shipyard projects (146 additional days), partially offset by fewer non-operating days for repairs and other days for which the rig was under contract but for which no dayrate was earned (68 fewer days), including downtime incurred by the Ocean Monarch during the first four months of 2011 due to a force majeure assertion by a customer, which was ultimately settled in April 2011. During the first nine months of 2012, we recognized an additional $5.0 million in deferred mobilization revenue, compared to the same period in 2011, primarily 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 $221.2 million during the first nine months of 2012, compared to the same period in 2011, primarily due to 667 fewer revenue earning days ($179.6 million), which reflected an increase in unplanned downtime for repairs and the warm stacking of rigs between contracts (441 additional days) and planned downtime for mobilization and shipyard projects (155 additional days), partially offset by a net decrease in cold-stacked days during the period (180 fewer days) as a result of our decisions to construct the Ocean Onyx at the end of 2011 for deepwater service and to cold stack the Ocean Epoch during the first quarter of 2011. Revenue for the first nine months of 2012, compared to the same period in 2011, was further reduced by a decrease in average daily revenue earned ($25.7 million) and lower amortized mobilization revenue ($15.9 million). Contract drilling expense decreased $6.5 million during the first nine months of 2012, compared to the same period in 2011. The decrease in contract drilling expense during the first nine months of 2012 reflected lower personnel related costs ($9.7 million), freight and related costs ($9.0 million), maintenance and repair costs ($8.9 million) and revenue-based agency fees ($4.0 million), partially offset by higher recognized mobilization costs ($12.4 million) and shorebase support costs ($1.1 million), as well as losses on foreign currency hedges ($9.3 million). These changes in contract drilling expense were primarily the result of warm stacking the Ocean Whittington in the GOM during 2012, cold stacking the Ocean Epoch in early 2011 and the combined effect of lower mobilization expense and a lower operating cost structure for the Ocean Yorktown due to its relocation from Brazil in 2011, partially offset by higher costs associated with the 2012 demobilization of the Ocean Guardian from the Falkland Islands to the U.K. and subsequent shipyard project.

Jack-ups. Revenue and contract drilling expense for our jack-up rigs decreased $34.0 million and $39.0 million, respectively, in the first nine months of 2012, compared to the same period in 2011, primarily due to the sale of six jack-up rigs in 2012. Prior to the sale, our six jack-up rigs earned incremental revenue and incurred contract drilling expense of $32.1 million and $16.8 million, respectively, during the 2011 period. Contract drilling expense for the first nine months of 2012 decreased an additional $12.2 million, compared to the first nine months of 2011, inclusive of a $14.2 million reduction in contract drilling expense for the Ocean Scepter, which is currently operating offshore Mexico at a lower cost structure than offshore Brazil.

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10qk
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