DIAMOND OFFSHORE DRILLING, INC. - FORM 8-K - EX-99.1 - September 15, 2010

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Exhibit 99.1

1

DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
RECENT COMMITMENTS — (See Body of Report For Contract Details/Date Changes and Other Information)
     
Ocean General
  two wells
     
Ocean Sovereign
  30-day extension
                                                                 
    Nominal                                   Dayrate            
Rig Name   WD*   Location   Status   Operator   Current Term   ($000s)   Start Date   Est. End Date
Domestic Deepwater Semisubmersibles (2) (Note 1)
Ocean Victory (Note 2)
     5,500’     GOM   Actively Marketing   DODI   Gap in contract           late Aug. 2010   early Nov. 2010
 
           GOM   Contract Continuation   ATP   continue six-well minimum   low 560’s   early Nov. 2010   early Feb. 2011
 
           GOM   Actively Marketing   DODI   Gap in contract           early Feb. 2011   early June 2011
 
           GOM   Contract Continuation   ATP   balance 1-year term   low 540’s   early June 2011   mid Aug. 2011
Ocean Monarch (Note 3)
     10,000’     GOM   Resume Original Contract   Anadarko   cont. four-year term   low 440’s   early August 2010   mid March 2013
Domestic 2nd Generation Semisubmersibles (1) (Note 1)
Ocean Saratoga
     2,200’     GOM   Current Contract   Taylor   one-year extension + unpriced
option		     200-210     mid July 2010   late June 2011
Note (1). On May 30, 2010, the U.S. government implemented a six-month moratorium on certain drilling activities in water deeper than 500 feet in the U.S. Gulf of Mexico (GOM) and subsequently implemented enhanced safety requirements applicable to all drilling activities in the GOM, including drilling activities in water shallower than 500 feet. On June 22, 2010, the U.S. District Court for the Eastern District of Louisiana granted a temporary injunction which immediately prohibited enforcement of the moratorium. The government appealed District Court’s decision and requested that the U.S. Court of Appeals for the Fifth Circuit stay the injunction pending appeal. The Fifth Circuit denied the government’s stay motion. While the appeal is pending, the government has rescinded the moratorium and ordered a new suspension through November 30, 2010, subject to modifications by the government under certain circumstances, of drilling activities using subsea blowout preventers (BOPs) or surface BOPs on floating facilities. Further proceedings with respect to the moratorium and the new suspension are pending. We currently have five rigs under contract in the GOM, including the Ocean Monarch, three of which use subsea BOPs. We are not able to predict the outcome of these legal proceedings, whether enforcement of the moratorium will be permanently enjoined, whether the suspension will remain in place, or whether the government will seek to implement additional restrictions on or prohibitions of drilling activities in the GOM; and we are not able to predict the impact of these events on our operations. Our customers may seek to move rigs to locations outside of the GOM, perform activities permitted under the moratorium and the enhanced safety requirements, or attempt to terminate our contracts pursuant to their respective force majeure provisions. If an actual force majeure event occurs, as determined under the applicable contract, these agreements generally provide for a force majeure rate that extends for a specified period of time and varies from contract to contract. Several customers have either declared force majeure or indicated that they may declare force majeure under their relevant contracts. We are working closely with our customers to assess each situation.
Note (2). Victory — In regard solely to the ATP contract, for a minimum of the first 240 days of the initial one-year contract period, Contract Drilling Revenue is to be recognized under normal GAAP accrual accounting at $540,000 per day, and additional contract dayrate of $20,000 is to be recognized as interest income over applicable periods reflecting deferred payment plan. The contract calls for $75,000 per day of the $560,000 contract dayrate to be paid on a current basis and the remaining $485,000 per day to be paid pursuant to an overriding royalty interest structure, as discussed in the Company’s Form 8-K that was filed on June 3, 2009. Remaining days under the initial one-year contract period will be deferred until approximately the fourth quarter of 2011, when the contract provides that the rig will be utilized by the operator at a dayrate of $540,000 payable in cash.
Note (3). Monarch — On September 13, 2010, we received notice of termination of the drilling contract from the operator, Anadarko Petroleum Corporation, on the grounds that the actions of certain governmental authorities, relating to a moratorium on certain drilling activities in the U.S. Gulf of Mexico following the Macondo well blowout, constitute a condition of force majeure under the drilling contract. Such notice purports to terminate the drilling contract effective five days after the date of our receipt of the notice. The operator has also filed suit against us in U.S. District Court in Houston seeking a declaratory judgment that its termination of the drilling contract is warranted under the contract. We do not believe the events cited by the operator come within the definition of force majeure under the drilling contract, and we do not believe that the operator has the right to terminate the drilling contract on this basis. Although we cannot predict with certainty the results of any such litigation, and there can be no assurance as to its ultimate outcome, we intend to vigorously defend this litigation and challenge the operator’s attempt to terminate the drilling contract.

 

 

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DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
                                                                 
    Nominal                                   Dayrate        
Rig Name   WD*   Location   Status   Operator   Current Term   ($000s)   Start Date   Est. End Date
Domestic Jack-ups (2) (Note 1)
Ocean Columbia
   250’ IC   GOM   Current Contract   Chevron   two wells + unpriced option   high 40’s   late July 2010   late Sept. 2010
Ocean Titan (Note 4)
   350’ IC   GOM   Current Contract   Ankor Energy   3rd 90-day extension   mid 60’s   mid
March 2010		   early Oct. 2010
 
           GOM   Intermediate Survey   DODI                   early Dec. 2010   mid Dec. 2010
Note (4). Titan — On June 15, 2010, we entered into a contract amendment which provides for a special permit standby rate of zero dollars ($0) during periods when the operator is unable to continue operations while waiting on certain regulatory permits.

 

 

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DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
                                 
Rig Name   Nominal
WD*		   Location   Status   Operator   Current Term   Dayrate
($000s)		   Start Date   Est. End Date
International Semisubmersibles (26)                        
North Sea/Mediterranean                        
Ocean Nomad
  1,200’   North Sea   Current Contract   SPD/Nautical   one well   mid 240’s   mid Aug. 2010   late Sept. 2010
 
      North Sea   Future Contract   SPD/Xcite   one well + unpriced option   mid 240’s   late Sept. 2010   early Nov. 2010
Ocean Guardian
  1,500’   Falkland Is.   Current Contract   AGR/Desire/
Rockhopper 		  Eight firm wells plus two
remaining optional wells 		  mid 240’s   mid Feb. 2010   mid Jan. 2011
Ocean Princess
  1,500’   North Sea   Current Contract   Talisman   remainder Nomad
contract 		  upper 330’s   late April 2010   early April 2011
 
      North Sea   Future Contract   Talisman   120-day additional term   mid 270’s   early April 2011   late July 2011
Ocean Vanguard
  1,500’   North Sea   Resume current contract   Statoil   three-year term + unpriced
option 		  high 340’s   mid Aug. 2010   mid June 2013
Ocean Endeavor (Note 5)
  10,000’   Mobe to Egypt   Current Contract   Burullus   one-year term + unpriced
option 		  mid 220’s   mid July 2010   late June 2011
Ocean Confidence
  10,000’   Congo   Mobe for Congo   DODI   interrupt contract       mid July 2010   mid Sept. 2010
 
      GOM   Future Contract   Murphy   interim contract for 90 days +
unpriced option 		  low 390’s   mid Sept. 2010   mid Dec. 2010
 
          Mobe to GOM   DODI           mid Dec. 2010   mid Feb. 2011
 
      GOM   Future Contract   Murphy   resume interrupted contract +
unpriced option 		  low 510’s   mid Feb. 2011   mid Feb. 2012
Ocean Valiant (Note 6)
  5,500’   Angola   Current Contract   Total   two-year term   low 620’s   late Sept. 2009   late Sept. 2011
Note (5). Endeavor — In connection with the relocation of this rig out of the GOM pursuant to this contract, the previous operator paid an early termination fee of $31 million in order to satisfy certain contractual obligations.
Note (6). Valiant — Dayrate subject to certain potential adjustments that are not expected to be material.

 

 

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DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
                                 
Rig Name   Nominal
WD*		   Location   Status   Operator   Current Term   Dayrate
($000s)		   Start Date   Est. End Date
Australasia
                                
 
Ocean Patriot
  1,500’   Australia   Current Contract   Apache   two-year term + unpriced option   between 380-420   late Jan. 2009   late Dec. 2010
 
Ocean America
  5,500’   Australia   Current Contract   Woodside   two-year term   mid 420’s   late June 2010   late May 2012
 
Ocean Epoch
  3,000’   Australia   Current Contract   BHPB   90-day extension   low 280’s   mid Sept. 2010   late Dec. 2010
         
 
      Australia   Future Contract   Japan Energy   one well   mid 290’s   late Dec. 2010   late Jan. 2011
 
Ocean General
  3,000’   Vietnam   Current Contract   PVEP   Approx. two-year term   high 250’s   mid Oct. 2008   early Nov. 2010
         
 
      Indonesia   Future Contract   Premier Oil   two wells + unpriced option   low 240’s   early Nov. 2010   early Feb. 2011
 
Ocean Rover
  8,000’   Malaysia   Current Contract   Murphy   two-year term ext.   low 450’s   late Feb. 2009   early Oct. 2010
         
 
      Indonesia   Future Contract   Murphy   est. six months   high 370’s   early Oct. 2010   late March 2011
         
 
      Malaysia   Resume Current Contract   Murphy   resume two-year ext.   low 450’s   late March 2011   mid Aug. 2011
 

 

 

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DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
                                     
Rig Name   Nominal
WD*		   Location   Status   Operator   Current Term   Dayrate
($000s)		   Start Date   Est. End Date
Brazil
                                    
 
Ocean Ambassador
  1,100’   Brazil   Current Contract   OGX   3-year term + unpriced option   low 260’s   mid Sept. 2009   mid Sept. 2012
 
Ocean Whittington
  1,650’   Brazil   Current Contract   Petrobras   5-year term (includes 50% of
pot.15% bonus) 		  low 240’s   late Jan. 2009   late Aug. 2012
 
Ocean Concord
  2,300’   Brazil   Current Contract   Petrobras   5-year term (includes 50% of
pot.15% bonus) 		  upper 240’s   early Jan. 2008   early Jan. 2013
 
Ocean Lexington
  2,200’   Brazil   Current Contract   OGX   3-year term + unpriced option   mid 330’s   early Feb. 2010   early Feb. 2013
 
Ocean Yorktown
  2,850’   Brazil   Current Contract   Petrobras   5-year term (includes 50% of
pot.15% bonus) 		  low 250’s   mid Aug. 2008   mid Aug. 2013
 
Ocean Yatzy
  3,300’   Brazil   Current Contract   Petrobras   5-year term (includes 50% of
pot.10% bonus) 		  mid 250’s   early Oct. 2009   early Oct. 2014
 
Ocean Quest
  4,000’   Brazil   Current Contract   OGX   2-year term + unpriced option   low 340’s   mid Feb. 2010   mid Feb. 2011
         
 
      Brazil   Resume Contract   OGX   2-year term + unpriced option   low 420’s   mid Feb. 2011   late Dec. 2011
 
Ocean Winner
  4,000’   Brazil   Special Survey   DODI         0     mid May 2010   mid Oct. 2010
         
 
      Brazil   Resume Current Contract   Petrobras   5-year term (includes 50% of
pot.10% bonus) 		  mid 280’s   mid Oct. 2010   mid March 2015
 
Ocean Worker
  4,000’   Brazil   Current Contract   Petrobras   6-year term (includes 50% of
pot.10% bonus) 		  mid 280’s   late Feb. 2009   late Feb. 2015
 
Ocean Alliance
  5,250’   Brazil   Current Contract   Petrobras   6-year term (includes 50% of
pot.15% bonus) 		  mid 360’s   late July 2010   late June 2016
 
Ocean Star
  5,500’   Brazil   Current Contract   OGX   one year + unpriced option   low 340’s   mid Feb. 2010   mid Feb. 2011
 
Ocean Baroness
  7,000’   Brazil   Future Contract   Petrobras   three-year term (includes 50% of
pot. 5% bonus) + option to
convert to 5 years during 1st year
of operation 		  mid 280’s   mid Sept. 2010   mid Sept. 2013
 
Ocean Courage
  10,000’   Brazil   Current Contract   Petrobras   five-year term (includes 50% of
pot. 6% bonus) + unpriced
option 		    400 - 410     mid Feb. 2010   mid Feb. 2015
 

 

6
DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
                                 
    Nominal                   Dayrate        
Rig Name   WD*   Location   Status   Operator   Current Term   ($000s)   Start Date   Est. End Date
Brazil Cont.
                                
 
Ocean Valor
  10,000’   Brazil   Acceptance test   DODI               late Sept. 2010
         
 
      Brazil   Future Contract   Petrobras   3-year term + option to
convert to 5 years during
1st year 		  low 450’s   late Sept. 2010   late Sept. 2013
 
Drillship (1)
                                
 
Ocean Clipper
  7,875’   Brazil   Current Contract   Petrobras   5-year term (includes 50%
of pot.5% bonus) 		  mid 180’s   mid Dec. 2005   mid Dec. 2010
         
 
      Brazil   Future Contract   Petrobras   5-year term (includes 50%
of pot. 5% bonus) 		  mid 310’s   mid Dec. 2010   early March 2011
         
 
      Brazil   Upgrade for Petrobras   DODI           early March 2011   mid May 2011
         
 
      Brazil   Resume Future Contract   Petrobras   5-year term (includes 50%
of pot. 5% bonus) 		  mid 310’s   mid May 2011   mid Dec. 2015
 
International Jack-ups (7)
                                
 
Ocean Nugget
  300’ IC   Mexico   Resume Current Contract   Pemex   849 day term   mid 130’s   early Feb. 2010   late July 2011
 
Ocean Summit
  300’ IC   Mexico   Current Contract   Pemex   476 day term   mid 130’s   late July 2009   mid Nov. 2010
         
Ocean Scepter
  350’ IC   Brazil   Standby/acceptance testing   DODI           mid July 2010   early Dec. 2010
         
 
      Brazil   Future Contract   OGX   one-year term + unpriced option   mid 130’s   early Dec. 2010   early Dec. 2011
 
Ocean King
  300’ IC   Montenegro   Actively Marketing   DODI                
 
Ocean Sovereign
  300’ IC   Indonesia   Current Contract   Kodeco   six-month extension   mid 70’s   early May 2010   early Nov. 2010
 
Ocean Heritage
  300’ IC   Suez Gulf   Current Contract   SUCO   six-month extension   high 50’s   late July 2010   mid Jan. 2011
 
Ocean Spur
  300’ IC   Egypt   Special Survey   DODI           mid Sept. 2010   late Oct. 2010
         
 
      Egypt   Future Contract   WEPCO   one-year extension   mid 60’s   late Oct. 2010   late Oct. 2011
 
NOTES: Rig utilization rates can be adversely impacted by additional downtime due to unscheduled repairs and maintenance, weather conditions and other factors.
An LOI is subject to customary conditions, including the execution of a definitive agreement and as such may not result in a binding contract.
Options are un-priced and any extension of contract is subject to mutually agreeable terms & conditions unless otherwise indicated.
Mobe revenues (if any) and mobe expenses are deferred, and generally are amortized over the life of the contract. GOM = Gulf of Mexico.
*Nominal Water Depth — Nominal water depth (in feet) reflects the current operating water depth capability for each drilling unit. In many cases, individual rigs are capable of drilling, or have drilled, in greater water depths. In all cases, floating rigs are capable of working successfully at greater depths than their nominal depth. On a case by case basis, we may achieve a greater depth capacity by providing additional equipment.
On rig utilization, assume 95% for DP units, 96% for conventionally moored rigs, and 98% for jack-ups.

 

7
DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
EXPECTED 2010 DOWNTIME — 10 DAYS OR LONGER* (Subject to Change)
Total thru Q2 =1,152
# Days
                     
Rig      Aug. Actual               Q3 Est            Comments
Shipyard — 5-Year Surveys/Maintenance
                    
Spur
    0       22     5-year survey, Q4 (est. 25 days)
Vanguard
    23       54     5-year survey
Winner
    31       92     5-year survey & steel replacement, Q4 (est. 15 days)
 
Total 5-year Surveys
    54       168      
Intermediate Surveys/Maintenance
                    
Alliance
    0       24     Uwild and thruster changeout
Titan
    0       17     Maintenance; Uwild, Q4 (est. 10 days)
 
Total Intermediate Surveys
    0       41      
Contract Preparation/Mobe/Acceptance Testing
                    
Confidence
    31       79     5-year survey, prep, mobe for Congo
Baroness
    31       70     Cont. Brazil prep, mobe, accept. Test
Endeavor
    31       70     Mobe to Egypt, Q4 (est. 16 days)
Scepter
    31       80     Contract prep, mobe for Brazil, Q4 (est. 62 days)
 
Total Contract Prep.
    124       299      
New Rig Commissioning/Contract Prep/Maintenance/Other
                    
Worker
    0       18     Maintenance
Courage
    16       31     Maintenance
Valiant
    16       16     Maintenance
America
    11       11     Maintenance
Valor
    31       87     Prep, mobe, accept. test for Brazil
 
Other Total
    74       163      
Total
    252       671      
 
 
* Does Not Include Cold or Hot Stacked Rigs (see following page for cold stacked units)
 
Survey Costs: During surveys, normal opex applies, plus additional costs.
 
Mobe Costs: Amortized mobe costs are generally offset by amortized mobe revenues.

 

 

8 
DIAMOND OFFSHORE DRILLING, INC. RIG STATUS REPORT AS OF
SEPTEMBER 15, 2010
                 
COLD STACKED RIGS: 7 — (4 jack-ups, 3 semisubmersibles)
 
Ocean Crusader
  200’ MC   GOM   Stacked   DODI
 
Ocean Drake
  200’ MC   GOM   Stacked   DODI
 
Ocean Champion
  250’ MS   GOM   Stacked   DODI
 
Ocean Spartan
  300’IC   GOM   Stacked   DODI
 
Ocean Voyager
  3,200’   GOM   Stacked   DODI
 
Ocean New Era
  1,500’   GOM   Stacked   DODI
 
Ocean Bounty
  1,500’   Malaysia   Stacked   DODI
 
Forward-Looking Statements: The rig status report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain or be identified by the words “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” believe,” “should,” “could,” “may,” “might,” “will,” “will be,” “will continue,” “will likely result,” “project,” “budget,” “forecast,” and similar expressions. Statements by the Company in the rig status report that contain forward-looking statements include, but are not limited to, statements regarding the current term, future dayrates, future status, start and end dates, and comments concerning future contracts and availability, letters of intent, utilization, surveys, downtime and other aspects of the Company’s drilling rigs, as well as statements concerning the moratorium on, or suspension of, certain drilling activities in the GOM and enhanced safety requirements implemented by the U.S. government, related legal proceedings and outcomes thereof, the impact of these and related events on our operations and revenues, the effects of claims of force majeure and the outcomes of discussions with operators with regard thereto, rigs being upgraded or to be upgraded and the revised Ocean Victory contract. Such statements are inherently subject to a variety of assumptions, risks and uncertainties that could cause actual results to differ materially from those anticipated or projected. A discussion of the risk factors that could impact these areas and the Company’s overall business and financial performance can be found in the Company’s reports and other documents filed with the Securities and Exchange Commission. These factors include, among others, general economic and business conditions, contract cancellations, customer bankruptcy, operating risks, casualty losses, industry fleet capacity, changes in foreign and domestic oil and gas exploration and production activity, competition, changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, customer preferences and various other matters, many of which are beyond the Company’s control. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the rig status report, and the Company undertakes no obligation to publicly update or revise any forward-looking statement.

 

DIAMOND OFFSHORE DRILLING, INC. Reports