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

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EX-99.2 - EX-99.2 - DIAMOND OFFSHORE DRILLING, INC.	d483011dex992.htm
8-K - FORM 8-K - DIAMOND OFFSHORE DRILLING, INC.	d483011d8k.htm

Exhibit 99.1

Contact:

Samir Ali

Sr. Director, Investor Relations

& Corporate Development

(281) 647-4035

Diamond Offshore Announces Third Quarter 2017 Results

•

Net income of $11 million, or $0.08 per diluted share

•

Adjusted net income of $34 million, or $0.25 per diluted share, excluding costs associated with the redemption of our 2019 senior notes

HOUSTON, October 30, 2017 — Diamond Offshore Drilling, Inc. (NYSE: DO) today reported the following results for the third quarter of 2017:


	Three Months Ended
Thousands of dollars, except per share data	September 30, 2017		June 30, 2017		Change
Total revenues	$	366,023	$	399,289		(8)	%
Operating income		58,581		20,824		181	%
Adjusted operating income		58,581		92,092		(36)	%
Net income		10,799		15,949		(32)	%
Adjusted net income		33,787		62,273		(46)	%
Earnings per diluted share	$	0.08	$	0.12		(33)	%
Adjusted earnings per diluted share	$	0.25	$	0.45		(44)	%

“Despite the continued weakness in the offshore drilling market, we achieved favorable third quarter results,” said Marc Edwards, President and Chief Executive Officer. “During the quarter we were able to secure additional work for our proficient moored fleet, with new wins for the Ocean Apex and Ocean Patriot, at rates well above cash flow breakeven. In addition, we took proactive measures during the quarter to further enhance our liquidity runway and better position Diamond for the eventual recovery.”

As of September 30, 2017, the Company’s total contracted backlog was $2.6 billion, which represents 20 rig years of work.

CONFERENCE CALL

A conference call to discuss Diamond Offshore’s earnings results has been scheduled for 7:30 a.m. CDT today. A live webcast of the call will be available online on the Company’s website, www.diamondoffshore.com. Those interested in participating in the question and answer session should dial 844-492-6043 or 478-219-0839 for international callers. The conference ID number is 95338408. An online replay will also be available on www.diamondoffshore.com following the call.

ABOUT DIAMOND OFFSHORE

Diamond Offshore is a leader in offshore drilling, providing contract drilling services to the energy industry around the globe. Additional information and access to the Company’s SEC filings are available at www.diamondoffshore.com. Diamond Offshore is owned 53% by Loews Corporation (NYSE: L).

FORWARD-LOOKING STATEMENTS

Statements contained in this press release or made during the above conference call that are not historical facts are “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are inherently uncertain and subject to a variety of assumptions, risks and uncertainties that could cause actual results to differ materially from those anticipated or expected by management of the Company. A discussion of certain of the important risk factors and other considerations that could materially impact these matters as well as the Company’s overall business and financial performance can be found in the Company’s reports filed with the Securities and Exchange Commission, and readers of this press release are urged to review those reports carefully when considering these forward-looking statements. Copies of these reports are available through the Company’s website at www.diamondoffshore.com. These risk factors include, among others, risks associated with worldwide demand for drilling services, level of activity in the oil and gas industry, renewing or replacing expired or terminated contracts, contract cancellations and terminations, maintenance and realization of backlog, competition and industry fleet capacity, impairments and retirements, operating risks, litigation and disputes, changes in tax laws and rates, regulatory initiatives and compliance with governmental regulations, construction of new builds, casualty losses, and various other factors, many of which are beyond the Company’s control. Given these risk factors, investors and analysts should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Contract drilling	$	357,683		$	339,636		$	1,113,410		$	1,140,568
Revenues related to reimbursable expenses		8,340			9,542			26,128			67,900

Total revenues		366,023			349,178			1,139,538			1,208,468

Operating expenses:
Contract drilling, excluding depreciation		198,072			186,654			597,812			597,831
Reimbursable expenses		8,220			7,965			25,488			51,283
Depreciation		83,281			86,473			262,492			295,729
General and administrative		17,806			15,237			54,299			48,774
Impairment of assets		—			—			71,268			678,145
Loss (gain) on disposition of assets		63			(1,222	)		(2,085	)		(2,265	)

Total operating expenses		307,442			295,107			1,009,274			1,669,497

Operating income (loss)		58,581			54,071			130,264			(461,029	)

Other income (expense):
Interest income		776			150			1,347			592
Interest expense		(28,562	)		(19,032	)		(83,409	)		(68,704	)
Foreign currency transaction loss		(677	)		(712	)		(517	)		(7,833	)
Loss on extinguishment of senior notes		(35,366	)		—			(35,366	)		—
Other, net		1,447			269			1,322			(11,199	)

(Loss) income before income tax benefit		(3,801	)		34,746			13,641			(548,173	)

Income tax benefit (expense)		14,600			(20,819	)		36,646			59,588

Net income (loss)	$	10,799		$	13,927		$	50,287		$	(488,585	)

Income (loss) per share	$	0.08		$	0.10		$	0.37		$	(3.56	)

Weighted-average shares outstanding:
Shares of common stock		137,227			137,170			137,208			137,167
Dilutive potential shares of common stock		14			84			29			—

Total weighted-average shares outstanding		137,241			137,254			137,237			137,167

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(Unaudited)

(In thousands)


	Three Months Ended
	September 30,			June 30,			September 30,
	2017			2017			2016
REVENUES
Floaters:
Ultra-Deepwater	$	275,859		$	282,535		$	217,275
Deepwater		35,634			66,905			66,011
Mid-water		39,616			36,543			56,350

Total Floaters		351,109			385,983			339,636
Jack-ups		6,574			6,187			—

Total Contract Drilling Revenue	$	357,683		$	392,170		$	339,636

Revenues Related to Reimbursable Expenses	$	8,340		$	7,119		$	9,542

CONTRACT DRILLING EXPENSE
Floaters:
Ultra-Deepwater	$	139,619		$	136,661		$	124,099
Deepwater		27,139			31,340			36,226
Mid-water		17,753			15,771			17,634

Total Floaters		184,511			183,772			177,959
Jack-ups		6,197			6,978			1,833
Other		7,364			5,467			6,862

Total Contract Drilling Expense	$	198,072		$	196,217		$	186,654

Reimbursable Expenses	$	8,220		$	6,790		$	7,965

OPERATING INCOME
Floaters:
Ultra-Deepwater	$	136,240		$	145,874		$	93,176
Deepwater		8,495			35,565			29,785
Mid-water		21,863			20,772			38,716

Total Floaters		166,598			202,211			161,677
Jack-ups		377			(791	)		(1,833	)
Other		(7,364	)		(5,467	)		(6,862	)
Reimbursable expenses, net		120			329			1,577
Depreciation		(83,281	)		(85,982	)		(86,473	)
General and administrative expense		(17,806	)		(19,010	)		(15,237	)
Impairment of assets		—			(71,268	)		—
(Loss) gain on disposition of assets		(63	)		802			1,222

Total Operating Income	$	58,581		$	20,824		$	54,071

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)


	September 30, 2017		December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	276,686	$	156,233
Accounts receivable, net of allowance for bad debts		271,390		247,028
Prepaid expenses and other current assets		97,803		102,146
Assets held for sale		2,598		400

Total current assets		648,477		505,807

Drilling and other property and equipment, net of accumulated depreciation		5,432,689		5,726,935
Other assets		117,062		139,135

Total assets	$	6,198,228	$	6,371,877

LIABILITIES AND STOCKHOLDERS’ EQUITY
Short-term borrowings	$	—	$	104,200
Other current liabilities		180,970		236,299
Long-term debt		1,971,852		1,980,884
Deferred tax liability		124,929		197,011
Other liabilities		115,715		103,349
Stockholders’ equity		3,804,762		3,750,134

Total liabilities and stockholders’ equity	$	6,198,228	$	6,371,877

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2017			2016
Operating activities:
Net income (loss)	$	50,287		$	(488,585	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		262,492			295,729
Loss on impairment of assets		71,268			678,145
Loss on extinguishment of senior notes		35,366			—
Deferred income, net		8,379			(23,381	)
Deferred expenses, net		32,701			(1,099	)
Deferred tax provision		(73,873	)		(114,405	)
Other		2,090			17,976
Net changes in operating working capital		(22,075	)		127,614

Net cash provided by operating activities		366,635			491,994

Investing activities:
Capital expenditures (including rig construction)		(100,613	)		(598,236	)
Proceeds from disposition of assets, net of disposal costs		4,017			169,038
Other		31			4,603

Net cash used in investing activities		(96,565	)		(424,595	)

Financing activities:
Redemption of senior notes		(500,000	)		—
Payment of debt extinguishment costs		(34,395	)		—
Proceeds from issuance of senior notes		496,360			—
Net repayment of short-term borrowings		(104,200	)		(104,489	)
Other		(7,382	)		(609	)

Net cash used in financing activities		(149,617	)		(105,098	)

Net change in cash and cash equivalents		120,453			(37,699	)
Cash and cash equivalents, beginning of period		156,233			119,028

Cash and cash equivalents, end of period	$	276,686		$	81,329

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

AVERAGE DAYRATE, UTILIZATION AND OPERATIONAL EFFICIENCY

(Dayrate in thousands)


	Third Quarter 2017								Second Quarter 2017								Third Quarter 2016
	Average Dayrate ⁽¹⁾		Utilization ⁽²⁾			Operational Efficiency ⁽³⁾			Average Dayrate ⁽¹⁾		Utilization ⁽²⁾			Operational Efficiency ⁽³⁾			Average Dayrate ⁽¹⁾		Utilization ⁽²⁾			Operational Efficiency ⁽³⁾
Ultra- Deepwater Floaters	$	407		61	%		92.0	%	$	436		59	%		97.1	%	$	452		48	%		87.1	%
Deepwater Floaters	$	195		33	%		99.6	%	$	270		45	%		96.0	%	$	303		34	%		94.5	%
Mid-Water floaters	$	322		27	%		98.8	%	$	397		20	%		100.0	%	$	311		33	%		98.4	%
Jack-ups	$	75		95	%		95.3	%	$	75		86	%		90.8	%		—		—			—
Fleet Total							94.3	%							96.6	%							91.0	%

(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.

Non-GAAP Financial Measures (Unaudited)

To supplement the Company’s unaudited condensed consolidated financial statements presented on a GAAP basis, this press release provides investors with adjusted operating income, adjusted net income and adjusted earnings per diluted share, which are non-GAAP financial measures. Management believes that these measures provide meaningful information about the Company’s performance by excluding certain charges that may not be indicative of the Company’s ongoing operating results. This allows investors and others to better compare the company’s financial results across previous and subsequent accounting periods and to those of peer companies and to better understand the long-term performance of the Company. Non-GAAP financial measures should be considered to be a supplement to, and not as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

In order to fully assess the financial operating results of the Company, management believes that the results of operations adjusted to exclude the second quarter 2017 asset impairments, the third quarter 2017 loss on extinguishment of debt, as well as the related tax effects thereof, are appropriate measures of the continuing and normal operations of the Company. However, these measures should be considered in addition to, and not as a substitute for, or superior to, contract drilling revenue, contract drilling expense, operating income, cash flows from operations or other measures of financial performance prepared in accordance with GAAP.


	Three Months Ended
	September 30, 2017			June 30, 2017
Reconciliation of As Reported Operating Income to Adjusted Operating Income:
(In thousands)
As reported operating income	$	58,581		$	20,824
Impairments and other charges:
Impairment of rigs ⁽¹⁾		—			71,268

Adjusted operating income	$	58,581		$	92,092

Reconciliation of As Reported Net Income to Adjusted Net Income:
(In thousands)
As reported net income	$	10,799		$	15,949
Impairments and other charges:
Impairment of rigs ⁽¹⁾		—			71,268
Loss on extinguishment of senior notes ⁽²⁾		35,366			—
Tax effect of impairments and other charges:
Impairment of rigs ⁽³⁾		—			(24,944	)
Loss on extinguishment of senior notes ⁽⁴⁾		(12,378	)		—

Adjusted net income	$	33,787		$	62,273


	Three Months Ended
	September 30,			June 30,
	2017			2017
Reconciliation of As Reported Income per Diluted Share to Adjusted Earnings per Diluted Share:

As reported income per diluted share	$	0.08		$	0.12
Impairments and other charges:
Impairment of rigs ⁽¹⁾		—			0.51
Loss on extinguishment of senior notes ⁽²⁾		0.26			—
Tax effect of impairments and other charges:
Impairment of rigs ⁽³⁾		—			(0.18	)
Loss on extinguishment of senior notes ⁽⁴⁾		(0.09	)		—

Adjusted earnings per diluted share	$	0.25		$	0.45

⁽¹⁾	Represents the aggregate amount of impairment loss recognized during the second quarter of 2017 related to two semisubmersible drilling rigs.

⁽²⁾	Represents the loss recognized during the third quarter of 2017 related to the redemption of our 5.875% senior notes due 2019.

⁽³⁾

Represents the income tax effect of the aggregate impairment loss recognized in the second quarter of 2017. The income tax effect of the impairment loss has 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.

⁽⁴⁾	Represents the income tax effect of the loss on extinguishment of the 2019 senior notes recognized in the third quarter of 2017. The income tax effect of the loss was calculated using the U.S. corporate tax rate.

DIAMOND OFFSHORE DRILLING, INC. - FORM 8-K - EX-99.1 - October 30, 2017

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