Diamond Offshore Announces Second Quarter 2017 Results

Three Months Ended

June 30, 2017

March 31, 2017

Change

Total revenues 

$      399,289

$      374,226

7%

Operating income 

20,824

50,859

(59)%

Adjusted operating income 

92,092

50,859

81%

Net income

15,949

23,539

(32)%

Adjusted net income 

62,273

23,539

165%

Earnings per diluted share 

$           0.12

$           0.17

(29)%

Adjusted earnings per diluted share 

$           0.45

$           0.17

165%

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,

2017

2016

2017

2016

Revenues:

Contract drilling 

$     392,170

$     357,409

$     755,727

$     800,932

Revenues related to reimbursable expenses 

7,119

31,338

17,788

58,358

Total revenues 

399,289

388,747

773,515

859,290

Operating expenses:

Contract drilling, excluding depreciation 

196,217

198,336

399,740

411,177

Reimbursable expenses 

6,790

16,527

17,268

43,318

Depreciation 

85,982

105,016

179,211

209,256

General and administrative 

19,010

18,139

36,493

33,537

Impairment of assets 

71,268

678,145

71,268

678,145

Gain on disposition of assets 

(802)

(747)

(2,148)

(1,043)

Total operating expenses 

378,465

1,015,416

701,832

1,374,390

Operating income (loss) 

20,824

(626,669)

71,683

(515,100)

Other income (expense):

Interest income 

396

269

571

442

Interest expense 

(27,251)

(24,156)

(54,847)

(49,672)

Foreign currency transaction (loss) gain 

(927)

(3,513)

160

(7,121)

Other, net 

(62)

(12,046)

(125)

(11,468)

(Loss) income before income tax benefit 

(7,020)

(666,115)

17,442

(582,919)

Income tax benefit 

22,969

76,178

22,046

80,407

Net income (loss) 

$        15,949

$    (589,937)

$        39,488

$    (502,512)

Income (loss) per share 

$            0.12

$          (4.30)

$            0.29

$          (3.66)

Weighted-average shares outstanding:

Shares of common stock 

137,224

137,170

137,199

137,166

Dilutive potential shares of common stock 

3

-

36

-

Total weighted-average shares outstanding 

137,227

137,170

137,235

137,166

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

(Unaudited)             

(In thousands)             

Three Months Ended

June 30,

March 31,

June 30,

2017

2017

2016

REVENUES

Floaters:

Ultra-Deepwater 

$          282,535

$          243,465

$          214,102

Deepwater 

66,905

67,943

67,191

Mid-Water 

36,543

48,285

56,694

Total Floaters 

385,983

359,693

337,987

Jack-ups 

6,187

3,864

19,422

Total Contract Drilling Revenue 

$          392,170

$          363,557

$          357,409

Revenues Related to Reimbursable Expenses 

$              7,119

$            10,669

$            31,338

CONTRACT DRILLING EXPENSE

Floaters:

Ultra-Deepwater 

$          136,661

$          141,873

$          127,185

Deepwater 

31,340

33,080

34,776

Mid-Water 

15,771

19,267

25,862

Total Floaters 

183,772

194,220

187,823

Jack-ups 

6,978

5,323

6,876

 Other  

5,467

3,980

3,637

Total Contract Drilling Expense 

$          196,217

$          203,523

$          198,336

Reimbursable Expenses 

$              6,790

$            10,478

$            16,527

OPERATING INCOME (LOSS)

Floaters:

Ultra-Deepwater 

$          145,874

$          101,592

$            86,917

Deepwater 

35,565

34,863

32,415

Mid-Water 

20,772

29,018

30,832

Total Floaters 

202,211

165,473

150,164

Jack-ups 

(791)

(1,459)

12,546

Other  

(5,467)

(3,980)

(3,637)

Reimbursable expenses, net 

329

191

14,811

Depreciation 

(85,982)

(93,229)

(105,016)

General and administrative expense 

(19,010)

(17,483)

(18,139)

Impairment of assets 

(71,268)

-

(678,145)

Gain on disposition of assets 

802

1,346

747

     Total Operating Income (Loss) 

$            20,824

$            50,859

$         (626,669)

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

June 30,

December 31,

2017

2016

ASSETS

Current assets:

Cash and cash equivalents 

$         160,969

$         156,233

Accounts receivable, net of allowance for bad debts   

311,517

247,028

Prepaid expenses and other current assets   

107,690

102,146

Asset held for sale   

-

400

Total current assets 

580,176

505,807

Drilling and other property and equipment, net of accumulated 

  depreciation 

5,490,158

5,726,935

Other assets 

122,929

139,135

Total assets 

$      6,193,263

$      6,371,877

LIABILITIES AND STOCKHOLDERS' EQUITY

Short-term borrowings 

$                     -

$         104,200

Other current liabilities 

157,091

236,299

Long-term debt 

1,981,458

1,980,884

Deferred tax liability 

143,619

197,011

Other liabilities 

119,277

103,349

Stockholders' equity 

3,791,818

3,750,134

Total liabilities and stockholders' equity 

$      6,193,263

$      6,371,877

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended 

June 30,

2017

2016

Operating activities:

Net income (loss)

$      39,488

$    (502,512)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities

Depreciation   

179,211

209,256

Loss on impairment of assets

71,268

678,145

Deferred tax provision   

(54,425)

(162,531)

Other   

28,883

7,093

Net changes in operating working capital   

(87,544)

76,019

Net cash provided by operating activities 

176,881

305,470

Investing activities:

Capital expenditures (including rig construction) 

(71,889)

(533,412)

Proceeds from disposition of assets, net of disposal costs   

4,077

167,298

Other   

23

4,592

Net cash used in investing activities 

(67,789)

(361,522)

Financing activities:

(Repayment of) proceeds from short-term borrowings, net   

(104,200)

40,711

Other   

(156)

(408)

Net cash (used in) provided by financing activities 

40,303

Net change in cash and cash equivalents 

4,736

(15,749)

Cash and cash equivalents, beginning of period 

156,233

119,028

Cash and cash equivalents, end of period   

$     160,969

$     103,279

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY

(Dayrate in thousands)

First Quarter 

Second Quarter

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

$436

59%

97.1%

$450

50%

91.1%

$452

47%

86.7%

Deepwater Floaters

$270

45%

96.0%

$260

48%

96.6%

$301

35%

100.0%

Mid-Water Floaters

$397

20%

100.0%

$268

40%

100.0%

$313

30%

99.4%

Jack-ups

$75

86%

90.8%

$75

29%

99.9%

$335

13%

100.0%

Fleet Total

96.6%

94.3%

92.7%

⁽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

June 30, 

June 30, 

2017

2016

Reconciliation of As Reported Operating Income (Loss) to
Adjusted Operating Income:

(In thousands)

As reported operating income (loss) 

$           20,824

$        (626,669)

Impairments and other charges:

Impairment of rigs and associated inventory ⁽¹⁾ 

71,268

678,145

Adjusted operating income 

$           92,092

$           51,476

Reconciliation of As Reported Net Income (Loss) to
Adjusted Net Income:

(In thousands)

As reported net income (loss) 

$           15,949

$        (589,937)

Impairments and other charges:

Impairment of rigs and associated inventory ⁽¹⁾ 

71,268

678,145

Tax effect of impairments and other charges:

Impairment of rigs and associated inventory ⁽²⁾ 

(24,944)

(143,165)

Discrete tax items ⁽³⁾ 

-

77,252

Adjusted net income 

$           62,273

$           22,295

Three Months Ended

June 30, 

June 30, 

2017

2016

Reconciliation of As Reported Income (Loss) per Diluted
Share to Adjusted Earnings per Diluted Share:

As reported income (loss) per diluted share 

$

0.12

$

(4.30)

Impairments and other charges:

Impairment of rigs and associated inventory ⁽¹⁾ 

0.51

4.94

Tax effect of impairments and other charges:

Impairment of rigs and associated inventory ⁽²⁾ 

(0.18)

(1.04)

Other discrete tax items ⁽³⁾ 

-

0.56

Adjusted earnings per diluted share 

$

0.45

$

0.16

 ⁽¹⁾

Represents the aggregate amount of impairment losses recognized during (i) the second quarter of 2017 related to two semisubmersible drilling rigs and (ii) the second quarter of 2016 related to eight drilling rigs and associated inventory. 

⁽²⁾

Represents the income tax effects of the aggregate impairment losses recognized in the second quarters of 2017 and 2016.  The income tax effects of the impairment losses have 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.

⁽³⁾

Represents the aggregate of certain discrete income tax adjustments recognized during the second quarter of 2016, primarily related to valuation allowances for current and prior year tax assets associated with foreign tax credits, which we no longer expect to be able to utilize to offset income taxes in the U.S. tax jurisdiction.